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3G/HSPA

Europe's 3G Fire Sale

When it comes to the sale of second-hand goods, some draw the crowds while others, well, look a little less enticing. In Europe at present the main acquisition posturing is for Telia AB's mobile assets in Finland, while a 15 percent stake in Hutchison 3G UK Ltd. has failed to attract any latecomers to the 3G market.

Meanwhile, Vodafone Group plc (NYSE: VOD) is getting into a right old tussle for control of France's number two mobile player, SFR.

Let's start in Finland, where Telia is trying to flog its 3G license, its GSM 1800 business that has 250,000 customers, and the Finnish arm of its public WLAN service, called Homerun, that consists of just 40 access points. It has to sell these as a condition of its merger with Finnish telco Sonera Corp. (Nasdaq: SNRA). The assets are valued at anywhere between €50 million and €150 million.

So how's the sale going? "There are quite a few interested parties, but I can’t say how many or who they are," says Telia spokeswoman Charlotte Züger. And is there a deadline for the sale? "I don't know if we have to complete the sale before the merger. There is no public information about a timescale."

So who is interested? Hutchison Whampoa Ltd. has already stated its interest in broadening its 3G portfolio by bidding for the UMTS license (see Bidder Emerges for Finnish 3G) but isn't interested in the other assets. And it has some competition.

One company that has confirmed its interest in what Telia has on offer is, bizarrely, Virgin Mobile Telecoms Ltd.. "Yes, we're looking at it," Steven Day, Virgin Mobile's corporate affairs director tells Unstrung. "And it's under serious consideration. Beyond that I can't add much."

Even being interested in acquiring assets is a departure for the outfit known for its branded reselling businesses in the U.K. (with T-Mobile), the U.S. (with Sprint PCS [NYSE: PCS] -- see Branson Targets US Teens), Australia (with SingTel), and with the same partner in Singapore, where its business has been closed down (see Dictionary Corner: Review). Even if Virgin were interested only in the 3G license it would have to buy the existent, if somewhat limited, UMTS infrastructure that comes with it.

So what could be tempting it? "It does surprise me, as Virgin's strength is in building a business where it already has brand recognition and some sort of customer base from another part of Virgin that it can market the mobile service to," says Rakesh Mahajan, a principal at Adventis Corp. "But it could be looking to combine a mobile business with the launch of a low-cost airline business in Scandinavia and play off the synergies of those operations. Also, there's something to be said for having a mobile business based in Scandinavia, as it's the place for forward-thinking mobile technology and strategy. Having said that, I'd be surprised if it followed through with this interest."

Also interested in Telia's bits is Finnish operator Radiolinja Oy, which already holds a 3G license for Finland. "We have made an offer, but I don't know if that's official," investment director Timmo Hoijer tells Unstrung. "The offer is for more than just the 3G assets, and if we were to acquire the 3G assets then we would have to return the license to the regulator. We are testing the connection between our 3G infrastructure and that of Telia Mobile at the moment in two cities." Those cities are Helsinki and Tampere.

Another bidder is a consortium comprising mobile carriers' carrier Suomen 2G Oy, local carrier DNA Finland, and a newly formed company called 3P Oy (no Website). DNA Finland, through another consortium (Suomen 3G Oy), already holds a 3G license, so this consortium would have to return the license if its bid were successful, says Suomen 2G spokeswoman Anna Saramaki.

Finnish communications firm Jippii Group Oy has also been mentioned as a possible buyer, but spokesman Erja Makkula would only say that "as Jippii is active in the GSM market in Finland, it is clear that we want to closely follow the situation regarding Telia Mobile Finland, but we do not comment on different market rumors."

While Finland seems to be of some interest to investors, the 15 percent stake in Hutchison 3G UK that current shareholder KPN Mobile is trying to sell off does not appear to be so appealing (see KPN Bites the 3G Bullet). KPN tells us there is "no news -- no news at all" on the sale. Hutchison itself says it couldn't possibly comment: "It's KPN's business -- it's a shareholder issue," says head of corporate communications Ed Brewster. Looks like it's down to KPN's fellow shareholders Hutchison Whampoa Ltd. (65 percent) and NTT DoCoMo Inc. (NYSE: DCM) (20 percent) to pick up the pieces there.

In France, a battle is brewing for control of the country's number two mobile operator and 3G license-holder SFR, which is owned by Cegetel. Vodafone wants majority control, which it does not currently have (see Vodafone's French Fancy), and saw an opportunity to buy its way into power by offering financially-challenged fellow shareholder Vivendi cash for its stake in Cegetel.

Now Vivendi is looking to add to its existing 44 percent stake by buying British Telecom (BT)'s (NYSE: BTY) 26 percent stake -- so starting a bidding war with Vodafone! Pierre Danon, CEO of BT Retail, has confirmed that both parties have shown an interest in its Cegetel stake, and that will be good for the amount BT can raise for its stake.

Vodafone is keeping its cards close to its chest and is sticking to its line that it has expressed its desire to have a controlling stake in SFR and that "much depends on whether the other shareholders wish, at any stage, to sell," says Bobby Leach, Vodafone's head of group financial media relations.

But while Vivendi is scrabbling around for loans to keep itself operational while it sells parts of its empire it doesn't want, Vodafone has a war chest of billions of dollars to help land its catch. The odds seem stacked in favor the global mobile group.

— Ray Le Maistre, European Editor, Unstrung
www.unstrung.com
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