Light Reading

Sonae Closes In on Portugal Telecom

Ray Le Maistre
9/29/2006
50%
50%

Yet another European incumbent carrier looks set to change hands after the Portugal Competition Authority (PCA) gave a preliminary green light to Sonae 's proposed acquisition of Portugal Telecom SGPS SA (NYSE: PT).

Sonae, which made its initial move in February this year, wants to combine the incumbent carrier with its own telecom business, Sonaecom , and had proposed a €9.50 (US$12.05) per share offer for PT, valuing the national fixed and mobile operator at about €11 billion ($13.96 billion). (See Eurobites: M&A, IPO & KPN.)

Now the PCA has given its initial blessing, but its final decision will only be announced after a 10-day period, following further submissions from the two parties about the Authority's conditions.

Should the acquisition take place, Portugal Telecom would become the third mid-sized European incumbent to change hands in the past year. In January, a consortium of private equity firms calling themselves the Nordic Telephone Company ApS completed the takeover of Denmark's TDC A/S (Copenhagen: TDC). (See TDC Unveils $12B Offer and NTC Completes TDC Offer.)

Then, after a protracted courtship, Irish incumbent eircom accepted a near €2.4 billion ($3.05 billion) takeover offer from Australian finance group Babcock & Brown . The deal closed at the end of August. (See Eircom Accepts Offer.)

And in April 2005, Telefónica SA (NYSE: TEF) completed its acquisition of central European incumbent Cesky Telecom a.s. (See Telefonica Buys Cesky Telecom.)

Sonae's takeover bid is far from a done deal, though. The PCA has set a number of regulatory conditions to which Sonae must agree, including the separation of its fixed wholesale and retail businesses, and the sale of either PT's copper fixed access network or the incumbent's cable operator business (PT Multimedia). Sonae already has its own competitive fixed-line operator, Novis Telecom S.A.

Sonae must also allow a mobile virtual network operator (MVNO) to use its mobile network to become a competitor.

Despite those conditions, Sonae seems determined to continue, as it would be allowed to hang on to PT's market-leading mobile subsidiary, called TMN, with its wireless carrier Optimus Telecomunicações , which is the country's No. 3 mobile player. That consolidation, according to analysts at Lehman Brothers , accounts for the majority of the €2 billion ($2.54 billion) in post-merger cost savings Sonae hopes to achieve.

Jointly, Optimus and TMN would hold about 67 percent of Portugal's mobile market, while Vodafone Portugal has about 33 percent.

Portugal Telecom also holds a 50 percent stake in Brazilian mobile giant Vivo Participacoes SA , its joint venture with Telefónica.

According to local media reports, Sonae CEO Paulo Azevedo said he was still determined to proceed with the acquisition, and that holding on to either of PT's fixed broadband assets would allow Sonae to create a fixed/mobile service package, but that the conditions were more onerous than expected.

Now the regulator, Portugal Telecom, and its shareholders must wait for Sonae's next move, especially as PT's share price, currently at €9.85 ($12.50), continues to hover above the original bid price.

With PT having promised its shareholders a dividend sweetener should the deal not go through, Sonae may have to consider upping its bid. That, however, may be too bitter a pill to swallow given the set conditions, which will increase competition in fixed and mobile and incur additional costs for Sonae. (See S&P Negative on Portugal.)

Sonae may also have to deal with rival bids. With TDC and Eircom already under private equity ownership, rumors have persisted since Sonae's initial move that various consortia are waiting to spring an alternative bid.

Other European incumbents that may find themselves under acquisition scrutiny include Dutch carrier KPN Telecom NV (NYSE: KPN), which was linked with Telefónica earlier this year, and Belgacom SA (Euronext: BELG). KPN was forced to deny a rumor earlier this month that the neighbors had been in merger discussions. (See KPN, Siemens Under Scrutiny.)

KPN, which has had the "For Sale" sign in place since the Dutch government sold its protective "Golden Share," may become more attractive to bids once its ongoing network and business transformation program is nearer completion. (See Dutch Put KPN on the Block and KPN Lays Out IP Migration Plan.)

Swisscom AG (NYSE: SCM) and its neighbor Telekom Austria AG (NYSE: TKA; Vienna: TKA) are also potential consolidation candidates. The two operators held M&A talks in 2004, while Swisscom held merger talks with Eircom just last year. (See Swisscom Ends Eircom Talks and No Merger for Euro Carriers.)

— Ray Le Maistre, International News Editor, Light Reading

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Flash Poll
From The Founder
The Swedish vendor has undergone a significant transformation during the past few years, adjusting to the demands of next-generation communications companies.
LRTV Documentaries
The 3GPP's Road to 5G Standardization

4|17|15   |   4:43   |   (0) comments


Satoshi Nagata, chairman of the 3GPP's TSG-RAN group and a manager at NTT Docomo, explains the standardization process for 5G, as well as the biggest challenges and opportunities.
LRTV Documentaries
AlcaLu CTO Makes the Case for a New 5G Air Interface

4|16|15   |   3:54   |   (0) comments


Michael Peeters, CTO of wireless at Alcatel-Lucent, explains why 5G will require a new air interface to meet its diverse performance targets.
LRTV Documentaries
AlcaLu + Nokia: The New Uber-Vendor

4|15|15   |   2:42   |   (4) comments


Heavy Reading Senior Analyst Gabriel Brown discusses the technological and competitive opportunities and challenges if a merger between Alcatel-Lucent and Nokia comes to pass.
LRTV Huawei Video Resource Center
Huawei's Data Center Power Play

4|15|15   |   6:22   |   (0) comments


Huawei has developed industry-leading energy efficiency capabilities for its indoor and outdoor data center solutions, explains Dr. Fang Liangzhou, vice president of Huawei's Network Energy product Line.
LRTV Huawei Video Resource Center
Huawei’s Routers, Switches Get the Green Mark

4|15|15   |   2:02   |   (0) comments


TUV Rheinland's Frank Dudley explains how Huawei's routers and switches have been successfully tested by energy efficiency experts and have gained Green Mark Certification.
LRTV Documentaries
A Finn, a Frenchman & a Guy From New Jersey Walk Into a Merger...

4|15|15   |   3:17   |   (0) comments


Stop us if you've heard this one before... Light Reading CEO Founder & CEO Steve Saunders weighs in on the technical and cultural implications of a Nokia and Alcatel-Lucent merger.
LRTV Huawei Video Resource Center
Accounting for Better Solutions

4|10|15   |   02:31   |   (1) comment


Murad Yousuf, CTO at Saudi Arabia's Ministry of Finance (Dept. of Zakat & Income Tax), talks about the benefits of deploying router technology from Huawei.
LRTV Huawei Video Resource Center
What's in Store for Huawei & DataCore?

4|10|15   |   05:44   |   (0) comments


At the CeBIT trade show in Hannover, Germany, George Teixeira, CEO of software-defined storage (SDS) specialist DataCore Software, explains why he has just signed a partnership agreement with Huawei Technologies.
LRTV Huawei Video Resource Center
Du Puts Its Faith in Huawei's Routers

4|9|15   |   3:42   |   (0) comments


Adnan Masood, director of Enterprise MS Solutions Marketing at du, the United Arab Emirates (UAE) operator also known as Emirates Integrated Telecommunications Company, explains why his company chose to use Huawei's multifunctional AR routers as part of its managed enterprise services.
LRTV Huawei Video Resource Center
Huawei Gets Active in the Data Center

4|9|15   |   3:17   |   (0) comments


With enterprise users looking to maximize the use of their data center assets, Huawei’s Chief Architect & Technical Director of IT Data Center Solutions, Bruce Su, explains how the company's six-layer active-active data center solution is eradicating the need to deploy passive, redundant data center assets.
LRTV Huawei Video Resource Center
Blue Consult & Huawei for a Better Solution

4|8|15   |   4:01   |   (0) comments


Martin Rott, CEO, and Marc Metzler, head of sales virtualization, from Germany's Blue Consult discuss their collaboration with Huawei and TrendMicro to develop a secure, scalable IT platform that can meet the needs of the most demanding enterprise users.
LRTV Huawei Video Resource Center
Beach Petroleum on eLTE & Mining

4|8|15   |   3:09   |   (0) comments


Network systems integrator Jeremy Hamlyn explains how Huawei's secure packet-based trunking communications system, eLTE, can help remote communities and companies in the mining, oil and gas sectors, deploy efficient communications networks that are perfect for video and data as well as voice.
Upcoming Live Events
May 5, 2015, Hyatt McCormick Place, Chicago, IL
May 6, 2015, Georgia World Congress, Atlanta, GA
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
November 11-12, 2015, The Westin Peachtree Plaza, Atlanta, GA
All Upcoming Live Events
Infographics
Network Instruments, a JDSU division, shares results from its 2015 State of the Network, a global survey on security.
Hot Topics
Verizon Scores New OTT Content Deals
Mari Silbey, Independent Technology Editor, 4/16/2015
Can WiFi Calling Find Its Voice?
Iain Morris, News Editor, 4/13/2015
Senator Proposes New 'Title X' for Net Neutrality
Carol Wilson, Editor-at-large, 4/13/2015
Nokia, Alcatel-Lucent in Merger Talks
Iain Morris, News Editor, 4/14/2015
Nokia & Alcatel-Lucent: What's Going On?
Ray Le Maistre, Editor-in-chief, 4/15/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Data Center Interconnect, or DCI, is one of the hottest sectors in telecom currently. Since coming back to Light Reading last year, prodigal-son style, I've ...
LR CEO and Founder Steve Saunders sits down with the head of Qosmos to talk about the changing state of the art in deep packet inspection technology, including its role in SDN and NFV architectures.