BT Leads New Euro M&A Charge

BT Group plc (NYSE: BT; London: BTA) and Telia Company are the latest European carriers to dip into their acquisition warchests, with each announcing a new acquisition today. The British carrier added to its DSL customer base, and the Scandinavian operator beefed up its IT and network integration capabilities. (See BT Buys PlusNet and TeliaSonera Buys Cygate.)

Meanwhile, Telefónica SA (NYSE: TEF) is set to cement its position as a mover and shaker in China. And there looks to be a host of other deals just around the corner.

BT buys broadband specialist
BT is paying about £67 million (US$126.5 million) for profitable British ISP PlusNet plc to help ramp up its DSL customer numbers. The incumbent is offering 210 pence per share for the London-listed company, only a few pennies more than Wednesday's closing price of 206 pence, but PlusNet's directors, "having unanimously recommended the offer, have provided irrevocable undertakings to accept BT’s offer."

For its money, BT is getting nearly 200,000 broadband customers, an unspecified number of dialup customers, and a business that, in the 12 months to June 30, made a profit of £3.9 million ($7.4 million) from revenues of £41 million ($77.4 million). PlusNet will retain its brand, management, and headquarters in the northern city of Sheffield. (See PlusNet Reports H1, PlusNet Trials 24-Mbit/s DSL, and PlusNet Launches VOIP Service.)

PlusNet's broadband customer base is mostly hooked up to resold BT connections, though the ISP recently began migrating some customers across to unbundled lines supplied by Tiscali UK , a process that looks set to halt very soon. (See Tiscali Extends LLU Deal.)

BT has come in for analyst criticism lately about its broadband position, particularly regarding its retail customer growth. In its most recently reported financial quarter, BT Retail added 154,000 DSL customers, about 25 percent of the quarter's net adds, down from 30 percent of net adds in the previous quarter. Those new customers took BT Retail's total customer base (on September 30) to almost 3 million, just less than a third of the U.K.'s 9.3 million DSL lines, so the PlusNet acquisition gives it a slight increase in market share, from 32 percent to 34 percent. (See BT: 21CN Slips, IPTV Nears.)

Lehman Brothers analyst Graeme Pearson stated in a research note issued this morning that the purchase price values each broadband customer at about €495 ($634), compared with the €365 ($467) per broadband customer that Carphone Warehouse Group plc (London: CPW) paid for AOL (UK) Ltd. 's subscribers. (See Carphone Faces Broadband Hiccups.)

Pearson added, though, that in other recent acquisitions, European broadband customers have been valued at anywhere between €500 and €900 ($640 and $1,152).

The analyst said that, while the acquisition is a small one, it's regarded as a positive move, "since this signals a change in management's view towards buying broadband market share inorganically, particularly as its share remains among the lowest in Europe with some slippage recently." The Lehman team believes BT should follow the example of Dutch incumbent KPN Telecom NV (NYSE: KPN), which has been buying up small broadband players and developing new services. (See KPN Buys Dutch ISP, KPN Buys Tiscali's DSL Base, KPN Trials VDSL2, KPN Launches IPTV, and KPN Goes National With VOIP.)

Today's news gave PlusNet's share price a small boost, from 206 pence to 207.75 pence, just short of the takeover offer, while BT's stock inched up by half a penny to 281.5 pence.

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digits 12/5/2012 | 3:34:38 AM
re: BT Leads New Euro M&A Charge How long before one of Europe's Big Five -- BT, Deutsche Telekom, France Telecom, Telefonica, and Telecom Italia -- get swallowed up? Or will they be the ones left standing?
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