European telcos look to get bigger as AT&T looms


Sources tell Bloomberg Orange (ORAN -0.9%) and Deutsche Telekom (DTEGY.PK) are delaying the sale of their Everything Everywhere U.K. mobile JV (has an early 4G lead) as they wait for AT&T (T +0.5%) to make its expected entry into Europe. AT&T has reportedly eyed a number of European assets, including EE.

Likewise, Bloomberg joins other news sources in reporting Telefonica (TEF +0.2%) is thinking of growing its Telecom Italia (TI -1.5%) stake by taking full control of holding company Telco.

Debt-laden European carriers have been shedding assets left and right. But they're now showing an interest in getting bigger, thanks both to AT&T and a growing willingness by regulators to sign off on consolidation.

Orange CEO Stephane Richard has predicted approval of a proposed merger of Telefonica and KPN's German units, which would lower the number of mobile carriers in Europe's largest market to 3, would "create an [M&A] earthquake" on the continent. Richard added Orange would attempt to grow its Spanish/Polish positions, and consider wireline acquisitions in Belgium and Romania, if regulators don't object.

EU antitrust chief Joaquin Almunia has said there's no "magic number" for how many carriers need to be in a market. Meanwhile, proposed telecom rules stand to encourage M&A, both by hurting carrier profitability in individual markets and by harmonizing rules across markets.

Vodafone (VOD +0.3%) is expected to invest a chunk of its Verizon Wireless windfall in European assets. And there's plenty of speculation AT&T will make a bid for the giant international carrier.

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Comments (5)
  • Veritas1010
    , contributor
    Comments (3266) | Send Message
     
    With VOD's acquisition of Kabel in Germany moving forward past the 75% share limit, and large funds only recourse being the courts it would appear AT&T would have to acquire VOD sans Kabel or and/or Cable & Wireless recently purchased in the U.K.

     

    This doesn't really make economic sense for anyone and therefore I don't see it transpiring.

     

    S.A. readers' what's your take away?
    14 Sep 2013, 04:55 PM Reply Like
  • Energysystems
    , contributor
    Comments (2112) | Send Message
     
    I don't think T is opposed to "some" cable assets. Now, if Vodafone was to go out and spend another 10-15B on cable/wireline operators, then yes I think T would look to other companies to try and get a foothold into the international market. Some assets like Kabel could easily be spun off if that asset wasn't wanted. It is the largest cable operator in Germany, so it's not a bad asset to have.

     

    I think T going international makes plenty of sense. Now, how they go about this? Any number of possibilities. I think T/VOD make a lot of sense. Buying euro assets on the cheap, with exposure to growth markets like Africa, Asia, and India(for as troubled as it is, it's still a major growth market), along with a whole host of other international ops. For the price that's being talked of, 100-124B, I think that's a great price for T. Over 300M customers. For that price, it would be very hard or impossible to build such a portfolio piecemeal.
    15 Sep 2013, 04:21 AM Reply Like
  • Veritas1010
    , contributor
    Comments (3266) | Send Message
     
    Your point is well articulated. The reasoning here is clear, buying one entity and then spinning a few outward is a lot easier than re-inventing the wheel and cobbling together a portfolio.

     

    The question then more or less evolves then is does VOD wish to be purchased? My feeling sans evidence is not, and being an international company I can't see a hostile bid. I think VOD's management is going to be very satisfied with a leaner more focused VOD that is cash rich.
    15 Sep 2013, 10:56 AM Reply Like
  • Energysystems
    , contributor
    Comments (2112) | Send Message
     
    I agree, I don't see the current CEO interested in selling off VOD. There are valuable assets still within the portfolio, a much smaller debt profile, and enough cash in the coffers to really make things interesting. Hard to see the board/CEO cashing their chips in at this point.

     

    Personally, I'm holding my VOD shares, keeping my VZ shares, and if T does pursue an alternative international pursuit, I would be interested in starting a position around 30$ a share(guys' gotta hope for a good price lol).
    15 Sep 2013, 04:57 PM Reply Like
  • Veritas1010
    , contributor
    Comments (3266) | Send Message
     
    I agree Energysystems. I own T already and certainly would add on a (wishful thinking) dip.

     

    disc.: long T, VZ, VOD
    16 Sep 2013, 01:24 PM Reply Like
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