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FastWeb: We're Going It Alone

Italian triple-play operator Fastweb SpA (Milan: FWB) has decided to spurn multiple takeover bids from carriers and private equity groups, believing it can create greater value for its shareholders by continuing with its current organic growth, says the operator's chairman and chief shareholder Silvio Scaglia.

Scaglia told a conference call Monday afternoon that none of the offers made last year, which prompted a strategic review and the deployment of Deutsche Bank AG 's consultancy services, offered as much shareholder value as the carrier's anticipated growth. (See FastWeb Updates on Strategy.)

"We could have had a deal, but only below the value our growth implies," said Scaglia, who added that the "industrial buyers [telecom operators] were initially aggressive, but have since had problems of their own," while the private equity firms wanted to hike the operator's debt levels up to six times the current annualized EBITDA -- from the current level of just more than one times EBITDA. (See FastWeb Q4 Boosts Purchase Appeal.)

Scaglia also stated that he has no personal need to cash in his 25 percent stake in the company. "I have no urgency for cash," says the chairman, who was widely expected to sell his stake at the end of 2005. (See Eurobites: A Private Affair.)

That doesn't mean he will never sell his shares, though. "I am not in this for the eternity -- this isn't a company to be left to my children."

Also as part of its strategic review, the company has decided to propose to its annual general meeting in late April that €300 million (US$358 million) should be returned to shareholders in a one-off dividend payment. The chairman said the company can afford this because of the ongoing revenue growth and because its initial phase of network expansion has been completed ahead of schedule and at a lower cost than anticipated. (See FastWeb Unveils Expansion Plan.)

Scaglia said the expansion was driven initially by the threat of greater competition from Italy's other major alternative operator, Wind Telecomunicazioni SpA , which FastWeb believed would be acquired by Orange (NYSE: FTE) and then ramp up its fixed-line expansion. But Wind was acquired instead by Weather Investments, which has been less aggressive than FastWeb had planned for. (See We're in the Money.)

News of FastWeb's go-it-alone strategy saw its share price dip by nearly 1 percent to €41.27, valuing the operator at nearly €3.3 billion ($4 billion).

So what are FastWeb's growth prospects? Scaglia said 2006 revenue growth would be about 30 percent up from 2005's €967 million ($1.16 billion), and that similar levels of revenue growth could be maintained for the following few years. Those projections don't include any revenues from government business, which FastWeb is expected to pick up following an ongoing government pricing review. The chairman said any government business would generate margins similar to its existing residential business, somewhere in the mid-30 percent range.

He also said FastWeb would invest in WiMax technology to extend its broadband reach into less densely populated areas, and examine the potential of the mobile services market. "Our growth will unlock a lot of value for all shareholders, including myself," concluded the chairman.

FastWeb is one of the world's most advanced triple-play operators, and one of the pioneers in the IPTV sector, delivering video and broadcast TV services across fiber-to-the-home (FTTH) and DSL connections. While its total broadband customer base of about 720,000 is much smaller than that of Telecom Italia (TIM) , which has more than 5.5 million DSL customers, the incumbent has been feeling the heat from its competitor, and rushed out its own IPTV offering recently in a bid to rival FastWeb's service package. (See DT, TI Set to Spend Big on Broadband and TI Unveils IPTV Lineup.)

— Ray Le Maistre, International News Editor, Light Reading

digits 12/5/2012 | 4:05:32 AM
re: FastWeb: We're Going It Alone Conference call or sales pitch? Any cynic listening to Mr Scaglia's talk of 'unlocking the true value' etc might well have thought he sounded like a chairman desperately courting a new round of higher bids... And maybe he'll get some. Some of the analysts on the call were clearly suspicious of his motives, asking whether he was planning to sell his stake in the next two to three months.
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