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Eurobites: Merger Mania

Light Reading
News Analysis
Light Reading
6/27/2005

Europe's hot. Quite literally. But it's not just the mercury that's rising in the land of a thousand accents: The Continent's carriers (and some of those on offshore islands) are turning up the gas as they cook up their latest acquisition-based expansion plans.

The trends are clear: Europe's incumbent operators are seeking out opportunities outside their home territories, especially in the broadband market, while their rivals are checking out consolidation opportunities that will give them the scale to survive the transition to an IP-centric world.

So what are the hottest merger and acquisition rumors of the moment?

C&W's M&A maelstrom
is at the heart of the European acquisition rumor mill at the moment. There's hardly an alternative U.K. service provider that hasn't been linked to C&W in the past few years, with pan-European operator in the past regarded as the prime target.

Then last week was forced to deny media rumors that it was lining up a £4 billion (US$7.3 billion) bid for the U.K. operator. That was swiftly followed by a more credible suggestion, that cash-rich C&W is engaged in takeover talks with national U.K. operator Energis plc, which, like C&W, focuses on corporate customers.

Talk of such a deal originated in U.K. broadsheet The Independent, which said C&W believes a merger would result in operational cost savings of £150 million ($274 million) a year. It also noted that Energis has debts of £850 million and shrinking revenues, though it has recently won some significant contracts (see Energis Reports FY05 and Energis Wins £170M Contract ).

A move for Energis would make more sense than an offer for Colt, as C&W's primary concern, following the sale of its overseas operations, is to make itself a formidable U.K. carrier (see C&W Moves Ahead With NGN, C&W Chops & Changes, and C&W Has $150M Broadband Plan). Colt would pitch C&W straight back into cross-border competition, while Energis now restricts itself to the British market, which would fit much more with its domestic aspirations.

Neither company is commenting on the rumor.

Spanish small talk
Having seen spread its broadband wings into Germany and France, Deutsche Telekom AG (NYSE: DT) is believed to be doing the same, though Spain is where it's targeting a potential acquisition (see Italians Prep Big French DSL Rollout and Italians Invade Germany).

According to a local press report, the German carrier's Internet services unit, T-Online International AG, which has operations in France, Spain, Austria, and Switzerland, is eyeing up a controlling stake in broadband service provider Red Eléctrica Telecomunicaciones (RET) in a deal worth more than €100 million ($122 million).

RET, which uses the brand name Albura, provides wholesale services to carriers, ISPs, and large enterprises, and has been building out its network to deal with the growing demand in Spain for DSL (see Juniper Bags Deals, Nortel Wins Contracts, Partners, and Red Electrica Picks Ciena MS Switch).

Spain is a hotbed of broadband activity at the moment, as incumbent Telefónica SA ramps up its triple-play offering and rivals invest in alternative infrastructure (see Spain Preps $500M Broadband Net, Auna Picks Alcatel for Triple-Play, Eurobites: Rankings & Rumors, and Telefónica Prepares for IPTV Test).

Quartet scraps over Turkish delights
Four consortia have emerged as the final bidders for the 55 percent stake in Turk Telekomunikasyon A.S. being sold by the Turkish government.

Telecom Italia has joined forces with Middle East conglomerate Saudi Oger, while private equity firm The Carlyle Group has teamed up with Turkish firm Koc Holding. Local mobile operator Turkcell Iletisim Hizmetleri A.S. and Middle East carrier Etisalat lead the other groups.

Turkey's privatization agency is due to announce the winning bid, expected to be worth several billions of dollars, on July 1, this Friday.

Continental couplings
C&W and T-Online aren't the only carriers on the sharp end of some industry gossip. Here's a rundown of the other rumors doing the rounds:

  • Dutch incumbent is the latest carrier to be linked to Austrian mobile operator tele.ring Telekom Service GmbH, owned by Western Wireless Corp. (Nasdaq: WWCA). Deutsche Telekom and European power utility E.ON AG, already an investor in the country's number two mobile operator, Connect Austria (One), have also been named as potential bidders for the operator, valued at around €600 million ($729 million).

  • Belgian cable operator Telenet is reported to be interested in Altice One, a holding company with cable assets in France, Luxembourg, and Belgium, according to local newspaper De Tijd.
In Other (Non-M&A) News...
Fresh from its latest product launch at Supercomm (R.I.P.), Swedish broadband infrastructure vendor PacketFront AB has named former executive Mats Dahlin as its new chairman (see PacketFront Appoints Chairman).

Dahlin says he's impressed with PacketFront's innovative technology, which, the company claims, is thanks largely to its home-developed network management and provisioning software, called BECS.

No doubt the new chairman will be involved in pushing the vendor's new ASR10000 box, which the company is positioning as a B-RAS alternative (see PacketFront Announces Products, Customer). CEO Martin Thunman says the 32-Gbit/s router has been developed to aggregate data traffic generated from multiple fixed and wireless access technologies, and that, "in principle, it will work with any other vendor's access equipment. This product eliminates the need for a B-RAS," claims the CEO.

Thunman reckons carriers will need such a product when they come to grips with the capacity and operational demands of triple-play services. "There's a lot of naivety in this industry about the challenges of introducing IPTV," says the former Cisco man.

Other news of note from Europe includes:

— Ray Le Maistre, International News Editor, Light Reading

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