Seeking Alpha

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.
Comments (5)
  • 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
  • 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
  • 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
  • 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
  • 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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