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Eurobites: Ownership Issues

Ray Le Maistre
1/30/2006

In 2005, broadband growth and M&A activity dominated the European telecom scene. (See Eurobites: A Private Affair, Eurobites: Exit Strategies, Eurobites: Access All Areas, and Europe Is M&A Feverish .)

In 2006, well... it's more of the same!

First stop, Spain, where incumbent Telefónica SA (NYSE: TEF) has suffered a setback in its broadband plans.

Ministers block takeover
The Spanish government has blocked Telefónica's planned acquisition of a stake in privately held, fixed-wireless, broadband service provider Iberbanda , enforcing a recommendation made last December by the country's antitrust authorities, who feared the incumbent's move might stifle broadband competition.

Details of the proposed takeover were never released, though Spanish newspapers suggested Telefónica had agreed to buy a 45 percent stake in Iberbanda, which mainly targets business customers.

With its DSL subscriber base at nearly 3 million, Telefónica commands close to 60 percent of Spain's total broadband market, which comprises about 3.85 million DSL lines, 1.15 million cable broadband connections, and about 100,000 connections via fixed wireless, satellite, and fiber. So while Telefónica would hardly have been ramping up its subscriber base significantly, it's clear the competition authorities weren't keen on even a broadband minnow, especially one with a business customer focus, getting sucked up by the market leader.

Other Spanish broadband service providers include Jazztel plc , cable operator ONO , T-Online International AG , and Wanadoo SA . (See Eurobites: Access All Areas and Jazztel Adds ADSL2+ Subs.)

Telefónica's aborted investment was also likely to have been driven by Iberbanda's WiMax developments in the Andalucia region of southern Spain, where it has invested about €150 million (US$181 million). The alternative operator launched its commercial WiMax service, including high-speed Internet access and VOIP, in late 2005, having deployed technology from two of the sector's more prominent vendors, Alvarion Technologies Ltd. (Nasdaq: ALVR) and Aperto Networks Inc. . (See WiMax Goes Live in '05, Alvarion Expands Iberbanda, Aperto Claims WiMax QOS Kudos, and Aperto Deploys in Spain.)

The Spanish carrier has already deployed pre-WiMax systems from SR Telecom Inc. (Toronto: SRX) as part of its TRAC initiative to replace aging analog PSTN systems in Spain's rural areas. (See Telefonica Orders SR Telecom Gear.)

But further WiMax experience would be valuable to Telefónica given its substantial investments in Latin America and Central Europe, and its ongoing collaboration with China Netcom Corp. Ltd. (NYSE: CN; Hong Kong: 0906). (See Acquisitions Boost Telefónica in Q3, Telefónica Boosts Chinese Ties, and Telefonica Buys Cesky Telecom.)

A Telefónica spokeswoman says the carrier is still studying the situation regarding the Iberbanda ruling, and has not decided whether to appeal. As for WiMax, the spokeswoman says only that the carrier is already providing some fixed wireless services in some areas, and will continue to do so.

3 Italy plans IPO
Hutchison Whampoa Ltd. (Hong Kong: 0013; Pink Sheets: HUWHY) is to float its South European mobile operator 3 Italia on the Italian Stock Exchange in the coming weeks, though details regarding the price of the shares and the date of the listing are still unknown.

Italian press reports suggest the operator is aiming to raise between €2 billion and €3 billion ($2.4 billion and $3.6 billion) from the listing, but the company isn't commenting on any issues related to the IPO, first mooted by Hutchison in November 2005.

3 Italy has about 5.5 million customers, or about 8 percent of the total Italian mobile market, and is the 3G market leader, ahead of main rivals Telecom Italia Mobile SpA (Milan: TIM) and Vodafone Italy . It is also the closest among Hutchison's eight 3G operators to reaching an operating profit.

But the IPO keeps getting pushed back – only weeks ago analysts and the Italian media expected 3 Italy to be trading by the beginning of February. Hutchison's position won't have been helped by Orange (NYSE: FTE)'s recent hiccup, suggesting that the telecom services market is increasingly tough to forecast. (See FT Warns, Europe Quakes).

Neuf the center of attention
Privately held French carrier Neuf Cegetel Group (Euronext: NEUF), one of the competitive thorns in France Telecom's side, appears to be the alternative carrier du jour. Two of its investors, Vivendi and Belgacom SA (Euronext: BELG), have expressed interest in upping their stakes in the carrier.

With 28 percent each, Vivendi and the Louis Dreyfus Group are the lead shareholders in Neuf Cegetel, a national triple-play service provider that generated revenues of more than €2.5 billion ($3 billion) in 2004. Vivendi also controls French mobile operator SFR . (See French Carriers Announce Merger, Neuf: Time Is Right for IPTV, and Neuf Uses Nortel for VOIP.)

But Vivendi's CEO Jean Bernard Levy told French newspaper La Tribune he'd be interested in increasing his company's holding to gain a controlling minority stake in the carrier, which now has more than 1 million broadband customers.

Levy's statement comes only days after Belgacom's CEO, Didier Bellens, told local newspaper La Libre Belgique that he'd be interested in acquiring Neuf Cegetel. Belgacom, which already owns 5 percent of the French carrier, wants to expand its non-domestic operations as it comes under increasing pressure in its home market. It recently beat off France Telecom in a race to acquire European systems integrator Telindus Group NV (Euronext: Tel.BR). (See Belgacom Secures Telindus and FT Backs Off Telindus .)

Other recent European news of note includes:

— Ray Le Maistre, International News Editor, Light Reading

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