FastWeb Blows Hot for Wind

Triple-play pioneer FastWeb SpA has hired bankers to scope out a potential bid for Italy's number-two national operator Wind Telecomunicazioni SpA, which has been valued at up to €13 billion ($17.3 billion).

After weeks of rumors, during which FastWeb consistently denied any talks had taken place (see e.Biscom: Wind Rumor is Hot Air), the operator today announced that it had "appointed Deutsche Bank AG, jointly with Interbanca and Unicredito, in order to study the potential integration with Wind."

In its prepared statement, FastWeb noted this is "an opportunity that has to be considered in the light of the major industrial synergies between the two companies" (see FastWeb Studies Merger With Wind).

FastWeb spokeswoman Giovanna Guzzetti says those synergies come from Wind's experience in the mobile sector and FastWeb's experience in broadband services, a sector where Wind has aspirations. "We have unique experiences in broadband with our triple-play services that we could translate to Wind's customer base," she states.

She wouldn't comment on any financial matters related to any potential merger or acquisition. "This is something that the advisors, and other big financial minds, are working on," says Guzzetti.

The operator's share price rose 11 Euro cents, just a quarter of one percent, to €40.60 ($53.90) on the Milan Bourse this morning following the announcement.

Wind's owner, utility firm Enel SpA, has pledged to offload the operator in 2005, and now appears to have at least two interested parties. In addition to FastWeb, the Italian press reports that a consortium of businesses -- including an Italian bank and a French buyout firm – is preparing to make a bid this week.

Any potential buyer will need deep pockets. Enel's CEO Paolo Scaroni told Italian newspaper Il Mondo that he values Wind at €13 billion, but Italian analysts believe its value is closer to €10 billion ($13.3 billion).

A combined Wind/FastWeb would provide more unified competition to national incumbent Telecom Italia SpA (NYSE: TI), and provide both parties with greater protection from unwelcome suitors.

But if Wind is snapped up by any rival bidders, FastWeb would be left to defend itself against increasing pressure from Telecom Italia, which is lining up its own IPTV services (see Italtel Announces Triple-Play Contract and Microsoft IPTV: Now That's Italian!).

FastWeb, which recently announced a new CEO, is one of the pioneers in triple-play services, and one of the world's first IPTV service providers (see eBiscom Changes Name, CEO and Italians & Triple Play: It's Amore). But it is still a relatively small player. Its stronghold is in the major cities in Northern Italy, where, despite impressive growth in the past two years, its total customer base is still just 457,000. Of that total, 85 percent (390,000) are residential users, of which 161,000 have signed up for the operator's IPTV service.

FastWeb's third-quarter revenues were €185.6 million ($246.4 million), up from €123 million ($163.3 million) a year earlier, while its net loss was €42 million ($55.8 million), down from €55 million ($73 million) a year earlier (see e.Biscom Reports Soaring 3Q Revenues). It has a net debt of €814 million ($1.1 billion).

Wind, meanwhile, has about 30 million customers (14.5 million Internet access, 3.5 million fixed line, and 12 million mobile). Its 2003 revenues were €4.4 billion ($5.84 billion), up 12 percent from 2002. Wind's net loss was €588 million ($781 million), down from €900 million ($1.2 billion) in 2002, and it had a net debt of €7 billion ($9.3 billion) at the end of last year.

Telecom Italia is in a different league altogether. It recorded revenues of €7.7 billion ($10.2 billion) in its third quarter (see Telecom Italia Posts Q3).

FastWeb's announcement comes amid a flurry of consolidation in the Italian telecom market. Telecom Italia is set to retake full control of the country's dominant mobile operator Telecom Italia Mobile SpA (Milan: TIM). (See Euro Giants Buy Back Offspring and TI to Merge With TIM.)

As part of its new international drive, British national operator BT Group plc (NYSE: BT; London: BTA) recently bought out its partners in Italian business services carrier Albacom SpA (see Euro Carriers Go Xmas Shopping and BT Takes Control of Albacom).

— Ray Le Maistre, International News Editor, Light Reading

Peter Heywood 12/5/2012 | 12:59:20 AM
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