Euro Carriers Maintain M&A Madness

It may be the dog days of summer, but there's plenty of M&A activity going on across Europe.

Speculation abounds over the future of U.K. cable operator ntl group ltd. (Nasdaq: NTLI), which is being courted by a bunch of private equity firms. (See Reports: Equity Firms Approach NTL.) The fate of the company will have a lot to do with Virgin owner Sir Richard Branson, who holds a 10.5 percent stake following NTL's acquisition of Virgin Mobile Telecoms Ltd. , and who has yet to be approached by any potential buyers, according to the Financial Times.

NTL will soon be battling triple-play services from the likes of BT Group plc (NYSE: BT; London: BTA) and Sky , and Virgin Mobile today introduced the must-have offering this season -- free broadband. (See Virgin Offers Free Broadband.)

Pan-European ISP Tiscali SpA (Milan: TIS) is considering selling off its German operations to focus on its stronger markets such as the U.K. and Italy, according to the Italian press. The carrier will be busy in the months ahead integrating IPTV into its service lineup, following a merger with the U.K.'s Video Networks Ltd. (VNL) announced Monday. (See Tiscali Buys Into IPTV.) It plans to launch triple-play services in the U.K. by the end of year, followed by a rollout in Italy.

Teléfonos de México (Telmex) , owned by Mexican billionaire Carlos Slim, has upped its stake in Portugal Telecom SGPS SA (NYSE: PT) to become one of its top shareholders with a 3.4 percent holding, evidently swooping in before takeover speculation ramps up its share price. Portugal's second largest operator, Sonaecom , has launched a €10.7 billion (US$13.6 billion) hostile bid for PT.

PT CEO Henrique Manuel Fusco Granadeiro is trying to block the acquisition, proposing a plan to spin off the company's cable TV division, PT Multimedia, and dole out €3.5 billion ($4.49 billion) to shareholders. (See PT Spins Off.) Standard & Poor’s downgraded its credit rating on the carrier following the announcement, to reflect "PT's releveraging and the expected weakening of its business risk profile." (See S&P Negative on Portugal.)

S&P says PT's bonds are also falling fast, as Sonaecom would likely need to finance the purchase with notes that may increase the risk on PT's €2.9 billion ($3.72 billion) worth of debt securities.

Analysts have compared Telmex's move to Slim's acquisition of shares in WorldCom before it merged with MCI LLC , which he later sold to Verizon Communications Inc. (NYSE: VZ). (See Slim's Pickins.) Telmex also has an interest in the fate of Portugal Telecom since it owns Telmex's competitor in Brazil, Vivo Participacoes SA , a 50-50 joint venture with Telefónica SA (NYSE: TEF).

Staying with Portugal, Vodafone Group plc (NYSE: VOD) and AR Telecom have been shortlisted to buy Oni, the fixed-line telecom division of EDP (Energias de Portugal) reports Diario Economico. Local media reports quote a Vodafone spokesperson as saying the operator is analysing opportunities to step into Portugal's fixed-line market so it can offer converged fixed/mobile services, a strategy it has already set in motion in Germany. (See Vodafone Unveils Convergence Plans.)

Tele2 AB (Nasdaq: TLTO) and Versatel Telecom International N.V. (Pink Sheets: VRSAF) have hashed out a deal to merge their Dutch and Belgian divisions after earlier integration plans were put on hold. (See Versatel, Tele2 Merge Ops and Tele2 Delays Versatel Merger.) Versatel will acquire the units by issuing new shares to Tele2, which bought Versatel last summer. (See Tele2 Sets M&A Ball Rolling.)

Expanding Russian operator Golden Telecom Inc. acquired Telcom LLC on Wednesday, an operator in Nizhny Novgorod -- Russia’s third largest city. Golden will use Telcom's operations as a basis for building out its broadband network and says Telcom's extra capacity of more than 5,000 unused numbers will help ease a shortage of available numbers of the region. (See Golden Acquires Telcom.) The acquisition follows Golden Telecom's recent purchase of regional operator Kubtelecom LLC. (See Golden Buys Kubtelecom.)

— Nicole Willing, Reporter, Light Reading