M&A activity on the international telecoms market is picking up. The big operators in Europe are especially active, although some deals still remain at the rumour stage. Below we look at the details in search of a pattern and make a few cautious predictions. Smaller operators and deals have been excluded.
Vodafone. The company grouped its minority stakes into a separate unit in September. It’s sold the stake in China Mobile, and speculation is increasing over a pending sale of Polkomtel and SFR. The stake in Verizon Wireless is more difficult due to its large size. It could be worth USD 35 billion and a sale would lead to a heavy tax charge. A merger with Verizon is another option. The company’s growing focus on fixed telephony and broadband, as part of its Total Communications strategy, could lead to takeovers such as TNF in the Netherlands.
Deutsche Telekom. Since the profit warning in April 2009, prompted in part by T-Mobile USA, speculation has been rife over a possible sale of the American unit. Reports have suggested that the company may look for a partner in Clearwire (Wimax provider, majority held by Sprint), MetroPCS (a regional mobile operator) or AT&T. T-Mobile USA could also lease capacity from the wholesale LTE network being built by LightSquared, with DT also taking a stake in LightSquared. DT is also a candidate for consolidating its position in East Europe. It can raise its stakes in Magyar Telekom (Hungary, 59%), Makedonski Telekom (Macedonia, 51%) and T-Hrvatski Telekom (Croatia, 51%). It can also increase its stake in OTE (30%) and via OTE’s subsidiaries strengthen its positions in Romania and Serbia. Finally, Telekom Slovenije is also for sale.
France Telecom. In September FT said it wants to double its sales from emerging markets within five years. It doesn’t take a genius to know this won’t happen through organic growth. FT has just taken a stake in Meditel in Morocco. More takeovers will follow, although ‘transformational deals’’have been ruled out. FT already sounded out TeliaSonera in mid-2008, but there has been little follow-up since then. The focus appears to have shifted from Scandinavia and the Baltic states to emerging markets in Africa and Southeast Asia.
Telefonica. This takeover machine has been relatively quiet as of late. The biggest deal has been the acquisition of the rest of Vivo in Brazil. The market remains curious about a possible merger with Telecom Italia, in which Telefonica has a stake.
Tele2. Since the sale of its French activities in October 2009 the company appears to be more or less finished with its portfolio management’. Over time the operations in Germany and Austria could also be sold, but as of late the company has been pleased with the performance on the business market there. Tele2 still targets a top-2 position for its subsidiaries. Its takeover of BBned in the Netherlands is part of that strategy and more acquisitions and divestments can be expected to follow in order to realize the goal.
Liberty Global. Last we look at the American company mainly active on the European cable market. In March it said consolidation could be expected in Poland, Germany and the Benelux, but to date no deals have been announced.
Elsewhere on the market we have seen operators expanding their holdings to 100 percent. Swisscom is bidding for the remaining shares in FastWeb, and News Corp is trying to buy the rest of BSkyB to take the company private. Other logical deals that could follow include FT buying the rest of Mobistar and KPN taking 100 percent control of Reggefiber.
It’s clear the rumours will continue for some time and deals should follow. An important driver appears to be the need for growth. With stagnation in mature markets, expansion in emerging markets can provide some relief (see DT, FT). What’s remarkable is the little amount of competition for takeovers: DT is focusing on East Europe, FT on Africa and Asia and Telefonica on Latin America. With other companies it’s a question of consolidation on a select number of existing markets. Acquisitions are expected to focus on consolidation (Liberty Global) or the market for (business) fixed telephony and broadband (Vodafone, Tele2), with consumer IPTV also having Vodafone’s attention.
