Eurobites: New Year, More M&A

Portugal looks set for a flurry of M&A activity early in 2007, with the incumbent carrier one step closer to falling into new hands, and a gaggle of companies looking to pick up the leftovers.

After nearly a year of regulatory wrangles over its bid to buy Portugal Telecom SGPS SA (NYSE: PT) and its cable subsidiary PT Multimedia, Portuguese carrier Sonaecom has filed its takeover prospectus with the CMVM, Portugal's stock market regulator. (See Eurobites: M&A, IPO & KPN.)

The move follows the decision by Portugal's Competition Authority not to oppose the acquisition. That government body gave its preliminary thumbs-up to the deal more than three months ago. (See Sonae Closes In on Portugal Telecom.)

Sonaecom is sticking with its original offer of €9.50 per share in cash for Portugal Telecom (PT), which values the incumbent carrier at more than €11 billion (US$14.6 billion), and €9.03 per share in cash for PT Multimedia (PTM), which values the cable operator at about €2.3 billion ($3.1 billion).

But Sonaecom will have a tough time convincing the shareholders of its takeover targets to accept those offers, as PT's share price currently stands at €9.82 and PTM's at €9.71. In addition, PT's shareholders would need to vote for a change to the carrier's shareholding rules, which currently disallow any single shareholder owning more than 10 percent of the carrier's stock.

Should the takeover go through, though, a number of firms are waiting to see what might come of the fixed-line access assets Sonaecom would be forced to divest -- namely, either PT Multimedia or PT's copper access network. According to the Competition Authority, a number of private equity firms, including BC Partners and Silver Lake Partners , and operators including Liberty Global Inc. (Nasdaq: LBTY) and Vodafone Group plc (NYSE: VOD) have registered their interest in being potential buyers of the assets.

Vodafone, with its wholly owned Vodafone Portugal subsidiary, is already one of Portugal's three mobile operators, commanding a market share of about 33 percent, making it the country's second biggest operator with about 4.4 million subscribers.

The market leader is PT's mobile business, TMN, while Sonaecom's Optimus Telecomunicações is the third player. TMN and Optimus would combine to create a clear market leader if the acquisition goes through. It would, though, be required to open up its network to a mobile virtual network operator (MVNO) as part of any successful acquisition.

Brits love broadband
BT Group plc (NYSE: BT; London: BTA) says it's about to connect the U.K.'s 10 millionth DSL line years ahead of expectations. Not all of those lines are direct BT customers, though, as that 10 million total includes wholesale connections and lines unbundled by competitors. (See BT Boasts DSL Milestone.)

BT, however, is about to add to its own broadband tally, as 96.3 percent of PlusNet plc shareholders have agreed to sell their stock to the British incumbent, according to a statement made by BT to the London Stock Exchange today. (See BT Leads New Euro M&A Charge.)

That news comes as the U.K.'s already highly competitive broadband sector is about to become even tougher. Starting next Monday, Vodafone is offering its mobile subscribers an 8-Mbit/s DSL line and free calls to any U.K. fixed telephone line for £25 ($49.34) per month. (See Vodafone Unveils DSL Offer and Vodafone Unveils Convergence Plans.)

With Telefónica Europe plc (O2) already a DSL player, Orange a long-time British broadband operator, and Virgin Mobile now part of cable giant ntl group ltd. (Nasdaq: NTLI), T-Mobile (UK) and Three UK are the only major U.K. mobile operators without fixed broadband services to bundle with their wireless offerings, though 3 is pushing its mobile broadband credentials hard. (See Telefónica Buys Be, FT Turns Orange, and 3 Plots Mobile Broadband.)

Airwave up for grabs
Telefónica SA (NYSE: TEF) has decided to sell all or part of Airwave O2 Ltd. , the TETRA (Terrestrial Trunked Radio) network operator that provides secure mobile voice and data services to 200,000 emergency services users in the U.K., and has appointed JPMorgan Cazenove to undertake a strategic review.

So far, only Macquarie Communications Infrastructure Group, the telecom arm of Macquarie Bank , has been linked with a potential bid.

Euro snippets
  • Dutch incumbent KPN Telecom NV (NYSE: KPN) has restructured its Dutch operations to create divisions that focus on consumer and enterprise customers, replacing the former fixed and mobile divisions. The move will make it easier to sell combined fixed/mobile service packages. (See KPN Revamps Dutch Units.)

  • Alcatel-Lucent (NYSE: ALU) has completed the acquisition of Nortel Networks Ltd. 's UMTS access business, which involves the transfer of 1,700 staff. It's unclear just how much Nortel has pocketed, though, as both sides noted that the transaction involved a cash payment of $320 million, "less significant deductions" that are not being quantified. (See ALU Completes UMTS Buy and Alcatel Snags Nortel 3G Unit.)

    — Ray Le Maistre, International News Editor, Light Reading

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