Telefonica CEO Julio Linares said that a deal is close for the takoever of Germany’s Hansenet, a Telecom Italia unit. The last discussion point remains the price, Linares told El Economista, with rumours putting the figure at EUR 0.9-1.0 billion.
Hansenet and Dutch provider BBned, which together form Telecom Italia’s European Broadband, were put on sale one year ago. What could the latest rumours mean for BBned?
Telecompaper earlier suggested some possible candidates for BBned, inlcuding Tele2, Scarlet (Belgacom), or Online Breedband (Deutsche Telekom). But an outsider to the Dutch market could also be among the candidates; no one should write off that possibility too quickly. Telefonica could close some kind of ‘package deal’ for the German and Dutch broadband units. BBned is small fry but does have, in addition to its wholesale activities, a number of pretty strong providers in its portfolio: Bbeyond (business), Alice (non-business), InterNLnet (both), and a 49 percent stake in XMS, with Reggefiber holding the other 51 percent.
And now the price. Let's say that Telefonica will pay EUR 1 billion for Hansenet, how much then could BBned bring in?
If we look at sales (Q2 2009), than Hansenet is about 12 times larger than BBned and even 21 times greater from an EBITDA point of view. If we consider the size difference between the two companies, then BBned could be worth EUR 46-83 million.
For a purchase price of EUR 1 billion, the company that acquires Hansenet would be taking over around 0.86 times sales in the last four quarters and 4.1 times EBITDA for the same period. BBned reported, during the same time frame, total sales at EUR 87 million and EBITDA of EUR 9 million. If we transfer the multiples used for Hansanet to BBned, then the takeover price could run at EUR 37-75 million, not far off from the range reached when looking at company size.
Still, the range remains very broad; one must take account of a few more factors. First, Hansanet has a higher margin, but BBned shows a bit more growth. Add to that that Telefonica, with its existing German assets, must bring out the necessary synergies with its takeover of Hansenet. Should a ‘package deal’ come to play regarding BBned, Telefonica will not be looking out for synergies in the Netherlands. That would put the valuation of BBned under pressure. Finally, we must note market conditions, notably market saturation, pricing pressure, and the expensive transition to new technologies (FTTC, FTTH). These factors play pretty much equally in both the Netherlands and Germany, but demonstrate that it is a buyers’ market.
In conclusion, we put our ‘back of the enveloppe’ valuation of BBned at EUR 37-75 million, leaning more towards the lower side of the range. One must hope that Telecom Italia does not try to wring out every last cent from a possible deal, because being on sale for a whole year is not healthy for any company. With a new parent company, BBned would be able to take on the Dutch market. Who knows, perhaps Telecom Italia will, when it reports quarterly figures on 5 November, have some good news for the people at BBned?
