Europe's Abuzz With Broadband Buyouts

Orange (NYSE: FTE) and Sky have emerged as the frontrunners to buy AOL (UK) Ltd. , according to weekend media reports.

U.K. newspaper The Sunday Telegraph reported that France Telecom's Orange UK and BSkyB, which is due to unveil a detailed broadband strategy in the next few weeks following its acquisition of Easynet Ltd. , have submitted the highest first round bids in an auction of AOL UK's assets. (See AOL Mulls Euro Broadband Exit, FT Turns Orange, and Murdoch's Sky Takes on BT.)

No price information has been leaked, though a final price of more than £600 million ($1.1 billion) is expected. AOL UK, a Time Warner Inc. (NYSE: TWX) subsidiary, has more than 1.2 million broadband customers and about 900,000 dial-up subscribers, and has been installing its own DSLAMs in BT Group plc (NYSE: BT; London: BTA)'s local exchanges. (See Time Warner Invests in UK DSL.)

Other firms believed to have shown an interest in AOL UK include Carphone Warehouse Group plc (London: CPW) and Vodafone Group plc (NYSE: VOD). (See Free Broadband Comes to the UK and Vodafone Unveils Convergence Plans.)

AOL's Italian and German ISPs are also up for sale, and have received a bid from Telecom Italia (TIM) . (See Telecom Italia Bids for AOL Units.)

2006 looks like becoming the year of the British broadband acquisition. Orange rival Telefónica Europe plc (O2) , part of Telefónica SA (NYSE: TEF), has just accelerated its move into the U.K. broadband market with the acquisition of DSL upstart Be Un Limited , while Cable and Wireless plc (NYSE: CWP) is looking to sell its residential broadband subscriber base. (See Telefónica Buys Be.)

C&W shifted its strategy earlier this year to focus on large business customers and wholesale operations, including the use of its installed based of DSLAMs to offer wholesale DSL services to ISPs. So now it's looking to offload the 112,000 customers that signed up for its Bulldog retail DSL service in a process it believes will take a few months. (See C&W Neuters Bulldog.)

The move "allows us to simplify our relationship with our wholesale customers - by making clear that we will not compete with them - and to simplify our operations. In addition, these customers are of more strategic value to providers focusing on a retail play," notes the carrier in an email response to questions. C&W isn't providing any guidance on how much it hopes to raise from the sale.

Cable Consolidation
The U.K. isn't the only European market with shifting asset ownership. The highly competitive broadband market in the Netherlands looks set for some M&A action in the near future, according to business newspaper Het Financieele Dagblad.

It seems the long-awaited sale of Casema NV is coming to a climax, with five bidders reportedly scrapping over the privately-held cable operator that is valued at about €2 billion ($2.56 billion). (See Eurobites: No Let-Up on Euro M&A.)

Casema, which was sold by France Telecom to a consortium of private equity firms in 2002, provides its services, including TV, video, telecom, and broadband, to more than 1.4 million homes. (See France Telecom Sells Casema.)

The five reported bidders –- private equity players Cinven Ltd. , Warburg Pincus , Macquarie Bank , BC Partners , and the Dutch cable market leader United Pan-Europe Communications NV (UPC) (Nasdaq: UPCOY) –- are also believed to be the shortlisted bidders for Essent Kabelcom BV , which was put up for sale in early June.

Kabelcom is the country's second largest cable operator, providing services to 1.8 million homes, and could command a price of up to €3 billion ($3.8 billion). UPC Netherlands has more than 2.2 million customers.

All three major Dutch cable operators believe consolidation is necessary to keep pace with the national telecom operator KPN Telecom NV (NYSE: KPN), which has been busy launching new services and positioning itself as a triple play carrier. (See KPN Goes National With VOIP and KPN Launches IPTV.)

— Ray Le Maistre, International News Editor, Light Reading