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Eurobites: A Private Affair

What a year it's been for telecom M&A on the Old Continent! Eurobites' eyes are spinning in his wee little head at the number of deals done this year, and it's making us feel a trifle nauseous. (See Eurobites: Exit Strategies, Eurobites: So Shrink Me, Eurobites: Merger Mania, Eurobites: Incumbents Splash Their Cash, and Eurobites: M&A Special.)

What's particularly noticeable is the increasing level of involvement of the private equity brigade. The most prominent example of this is the $12 billion offer for Danish incumbent TDC A/S (Copenhagen: TDC), but that's by no means the only instance, and nearly every M&A rumor doing the rounds at the moment seems to include the possibility of a leveraged buyout. (See TDC Unveils $12B Offer, Infoquest Sells Q-Telecom, and Tele2 Sets M&A Ball Rolling.)

Just yesterday, British private equity firm Candover Partners Ltd. agreed to buy Liberty Global Inc. (Nasdaq: LBTY)'s Norwegian cable operator, UPC Norway, for €450 million ($538 million). (See Candover Buys UPC Norway.)

Why the sudden surge in private equity interest? Well, low interest rates means investors are channelling their capital into private equity and hedge funds, giving them billions of dollars with which to bid against corporate buyers (such as the carriers), according to the sages at Standard & Poor’s . Add to this the widespread availability of cheap debt, and the market is ripe for acquisitions by non-telecom players.

Not that the carriers always lose out to these opportunists. Orange (NYSE: FTE) managed to fend off rival private equity bidders when it won the race to buy Spanish mobile operator Amena earlier this year, while Telefónica SA (NYSE: TEF) also won the day when it snapped up Cesky Telecom a.s. (See FT Takes on Telefónica, Eurobites: Incumbents Splash Their Cash, and Telefònica Close to Czech Mate.)

So where are the private equity groups likely to strike next? Dutch incumbent KPN Telecom NV (NYSE: KPN) is potentially a target, now that the carrier has bought the government's so-called Golden Share that was a barrier to takeover attempts. (See Dutch Put KPN on the Block and KPN Buys Golden Share.)

And now that Swisscom AG (NYSE: SCM) has been forced to withdraw its interest, Irish carrier eir is also regarded as a target. (See Swisscom Ends Eircom Talks.)

And then there's dear old Blighty…

M&A rumors sweep the U.K.
There are plenty of rumors swirling around the U.K., where Cable and Wireless plc (NYSE: CWP), which has undergone a lot of upheaval in the past few years and made some acquisitions of its own, is periodically the subject of takeover talk in the City of London, the latest being that it has attracted private equity attention. (See C&W: Not Just a 'Pretty Network', C&W Wins Over Energis, C&W Moves Ahead With NGN, and C&W Buys British Bulldog.)

There's also persistent talk that British cable operators ntl group ltd. (Nasdaq: NTLI) and Telewest Global Inc. (Nasdaq: TWSTY) will find themselves the subject of a takeover offer from a consortium of private equity firms once they complete their $6 billion merger, and once NTL has concluded its takeover negotiations with Virgin Mobile Telecoms Ltd. (See NTL & Telewest: Together at Last! and NTL Eyes Mobile Buy.)

According to London's Sunday Times, a consortium including Apax Partners , Providence Equity Partners , and possibly The Blackstone Group , is preparing a bid that could value the combined NTL/Telewest/Virgin Mobile group at anything up to €8 billion ($14 billion).

And the gossip doesn't stop there. Regional U.K. service provider Kingston Communications plc is also the subject of takeover talk, and has admitted that it has received an approach. Word on the street is that The Carlyle Group LLC , which has been increasing its telecom M&A activity of late, is the stalker. (See Kingston Confirms Takeover Talks, EQT Sells Com Hem, and Carlyle Hires De Benedetti.)

In addition to all this intrigue, competitive carrier THUS plc (London: THUS) is still looking to fatten up, while British Sky Broadcasting Group plc is expected to add to its initial foray into the broadband world, and Carphone Warehouse Group plc (London: CPW) just splashed out on some of its fellow voice resellers. (See Carphone Dials Up Rivals, Murdoch's Sky Takes on BT, and THUS: Still Shopping.)

Meanwhile, Telefónica still needs to tidy up its takeover of mobile operator mmO2 plc (NYSE/London: OOM), a move that came out of the blue in late October, when nobody expected the Spanish Acquisition… (See Telefónica Swoops In on O2.)

Other Euro M&A tidbits
  • Italian triple play pioneer Fastweb SpA (Milan: FWB) is in the shop window after its management hired Deutsche Bank AG in November to "explore strategic alternatives representing valid options for [the] company’s further growth." It's expected to attract a number of bidders in the new year, including European incumbents looking for a foothold in the Italian market as well as private equity players.

  • European incumbents Belgacom SA (Euronext: BELG) and France Telecom are grappling over Belgian systems integrator Telindus Group NV (Euronext: Tel.BR). Belgacom made the initial move, with an offer of €13.5 per share, but had to raise its bid to €16.60 after FT stepped in with a counter offer of €15.80. (See Belgacom Ups Offer.)

    Telindus, which posted a small loss on revenues of €532 million ($630 million) in 2004, provides integration and support services in 14 countries, and also has a small stake – just less than 5 percent – in Belgian mobile operator Mobistar SA .

    Buying systems integrators, and moving further into IT services and support, is quite the thing for large European carriers to do these days as their traditional revenue streams are eroded. BT Group plc (NYSE: BT; London: BTA) has been particularly active in this area, and has even been cited by local Belgian press as a possible additional bidder for Telindus, though BT has declined to comment on the issue. (See BT Wins Fiat, Buys Atlanet, BT Buys TNS, and BT Buys Spanish ICT Business.)

    — Ray Le Maistre, International News Editor, Light Reading

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