European Carriers Catch M&A Fever

As the U.S. market winds down for the annual turkey-fest (a.k.a., Thanksgiving), European carriers have shifted up a gear with their merger and acquisition (M&A) activities, with Orange (NYSE: FTE) and Denmark's TDC A/S (Copenhagen: TDC) leading the way.

Those two operators are combining their Swiss assets -- Orange Communication S.A. (a.k.a., Orange Switzerland) and TDC's Sunrise Communications AG -- to create a single operator with about 3.4 million mobile customers (38 percent market share), 1.1 million fixed and broadband users (13 percent of the broadband market), and annual revenues (in 2008) of 3.1 billion Swiss francs (US$3.09 billion). (See FT, TDC to Merge Units.)

France Telecom will ultimately hold a 75 percent stake in the combined entity, and is paying TDC, which will hold the remaining 25 percent, €1.5 billion (US$2.26 billion) as part of that arrangement.

The resulting operator will be a stronger rival to incumbent Swisscom AG (NYSE: SCM), which has more than 5.5 million mobile customers, nearly 1.8 million broadband lines, and domestic revenues of more than CHF2.1 billion (US$2.1 billion) per quarter.

France Telecom's shareholders were positive about the news, with the French giant's share price rising by 2 percent to €17.40 on the Paris exchange. TDC's share price headed in the same direction, increasing by 8 percent to 244 Danish Kroner.

TDC, meanwhile, has other M&A matters on its mind: Its private equity owners (collectively called NTC), who acquired a controlling stake (nearly 88 percent) in the Danish incumbent and its international operations back in early, have initiated "a process with the purpose of evaluating strategic alternatives for the company." (See TDC Is Up to Something, NTC Completes TDC Offer, and TDC Unveils $12B Offer.)

That means either a trade sale, or, more likely, the flotation of part of the stake. About 12 percent of TDC's stock is traded on the Copenhagen exchange.

Elsewhere, Dutch incumbent KPN Telecom NV (NYSE: KPN) announced the sale of its wholesale and business services operations in Belgium, including its fiber network, to Mobistar SA for €65 million (US$98.1 million). (See KPN Sells Belgian Fixed Assets.)

KPN will continue to build its consumer and small business operations in Belgium, where it relies on a wholesale agreement with Mobistar for fixed broadband and VoIP services.

KPN has also just agreed on a final offer to buy up the shares it doesn't already own in international VoIP services player iBasis Inc. (Nasdaq: IBAS). The Dutch operator holds a 56 percent stake in iBasis. (See New KPN-iBasis Tender Offer.)

— Ray Le Maistre, International News Editor, Light Reading

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