Euro Carriers Carry on Buying

The M&A splurge continues, with Norway's Telenor opening its wallet the widest for a $1.9 billion mobile acquisition in Eastern Europe

August 2, 2006

4 Min Read
Euro Carriers Carry on Buying

Europe's carriers are showing no signs of letting up in their spending spree, with three of the regions incumbents dipping into their warchests in recent days.

And their moves show that broadband isn't the only potential growth sector -- mobile in underdeveloped markets and integration/support services for large enterprise customers are clearly also hot tickets with operators.

Telenor Wins Serbian Auction
Norwegian incumbent Telenor Group (Nasdaq: TELN) is forking out €1.51 billion ($1.9 billion) to buy Mobi 63 following an auction for the Serbian mobile operator, beating out Telekom Austria AG (NYSE: TKA; Vienna: TKA) and Orascom Telecom to the prize. (See Telenor Buys Mobi 63.)

Mobi 63, formerly known as Mobtel, is one of only two mobile operators in Serbia, where current mobile penetration stands at about 65 percent, compared with the near saturation levels in Europe's developed markets. The other mobile operator is incumbent carrier Telekom Srbija a.d. (Telekom Serbia).

Mobi 63 has more than 2 million users, a market share of about 45 percent, and has already secured a 3G license. Serbia's population is about 7.5 million. Telenor says Mobi 63's 2005 revenues were €233 million, generating earnings before interest and tax (EBIT) of €96 million. The operator has about 950 staff and no debt.

Telenor says the acquisition, which gives it more than 2 million users, a market share of about 45 percent, and a 3G as well as a GSM license, adds to its Balkan mobile holdings. "The acquisition of Mobi 63 will allow us to further our aim of creating a strong Telenor operational hub in this prioritised geographical area with long-term synergies across the companies," stated Telenor CEO Jon Fredrik Baksaas in a prepared statement.

Telenor, which has been in acquisitive mood in the past year, already has mobile operations in neighboring Hungary and Montenegro. (See Telenor on Billion-Dollar Spree.)

In a research note, analysts at Lehman Brothers state that while the price paid for Mobi 63 might seem high, Serbia has a low corporate tax rate of just 10 percent, making it easier to generate earnings.

However, more competition is looming, as Serbia is set to issue a third GSM license in the coming months. Telekom Austria, which also has a number of East European mobile assets, looks likely to bid for that license, but thought the bidding had got too high for the Serbian operator.

"Mobi 63 was sold at a price that we felt was not value accretive. As a consequence, we decided to withdraw from the bidding process," said Telekom Austria CEO Boris Nemsic in a prepared statement. "However, East and South-East Europe continues to be the focus of our expansion strategy and we expect to see other opportunities in this growth region over the coming years,” he added.

That strategy took a blow today, though, when Nemsic found his company had been outbid for the third GSM license in Slovakia, another mobile growth market. (See TA Outbid in Slovakia.)

BT, FT Buy IT Skills
Having bailed out of the bidding war for Belgian integrator Telindus last year, Orange (NYSE: FTE) has bolstered its integration and IT service capabilities with a different acquisition, shelling out €28.2 million ($36 million) for a controlling stake in the Diwan Group. (See FT Takes Over Diwan, FT Backs Off Telindus , and Belgacom Secures Telindus.)

The French giant reckons the "expertise of the Diwan Group in the network integration market as well as its skills in the areas of security, collaborative tools and call centers in France will be an additional asset for France Telecom and Orange Business Services," particularly when it comes to helping enterprise customers enter the wonderful world of IP. Mais oui!

The move followed just days after FT announced its latest financials, which were broadly in line with market expectations. The acquisition also follows the carrier's decision to sell its stake in France Telecom Mobile Satellite Communications for €60 million ($76.8 million), and its decision to sell its 54 percent stake in directories business PagesJaunes Groupe . (See FT Reports H1, France Telecom Sells Biz, and FT to Sell PagesJaunes.)

The sale of the PagesJaunes stake should raise about €3.3 billion ($4.2 billion), with FT already announcing that Kohlberg Kravis Roberts & Co. (KKR) has been chosen as the preferred bidder for the stake.

BT Group plc (NYSE: BT; London: BTA), meanwhile, has snapped up a tiny extra piece of IT services business with the €1.2 million ($1.6 million) acquisition of Telexis Polska, the Polish telecom services business of Italian car maker Fiat Group. (See BT Buys Polish Outfit.)

The move follows BT's $96 million acquisition of Atlanet, an Italian service provider owned by Fiat, which provided services not only to the automotive giant but to other Italian businesses too. That acquisition came hand in hand with BT winning a $541 million deal from Fiat to provide its telecom and networking services for the next five years. (See BT Lands Italian Job.)

So the latest buy is just another piece in that particular puzzle, as it helps BT deliver services and support to Fiat's operations in Poland, where it has 900 staff. And Telexis also brings another 100 or so new enterprise customers to BT Global Services.

— Ray Le Maistre, International News Editor, Light Reading

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