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Eurobites: UK's Vodafone Eyes TPG Merger in Australia – Reports

Iain Morris
8/22/2018

Also in today's EMEA regional roundup: Russia's MTS enjoys second-quarter growth; Welsh authorities take flak for broadband delays; Wind Tre makes progress on network overhaul; Cell C reports revenue growth in first half.

  • The UK's Vodafone Group plc (NYSE: VOD) is reportedly in discussions to merge its Vodafone Hutchison Australia business with broadband operator TPG. In statements issued to the Australian press, both companies confirmed they were in "exploratory" talks about a merger, which could help them to compete more effectively against larger rivals Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) and Optus. A merger would build on the existing relationship between the two operators: TPG Telecom uses Vodafone's network to provide its own mobile services, while Vodafone relies on TPG's dark fiber for backhaul purposes. Vodafone served about 5.8 million customers in Australia at the end of 2017 and made around A$3.5 billion ($2.6 billion) in sales in the Australian market that year -- an increase of 3.4% on revenues in 2016. (See Telstra Profits Pummeled by NBN.)

  • MTS, Russia's largest operator, reported a strong set of results for the second quarter of the year, with revenues up 7%, to 114.3 billion Russian rubles ($1.7 billion), and operating profits rising 15.7%, to RUB27.6 billion ($410 million), compared with the year-earlier period. Mobile TeleSystems OJSC (MTS) (NYSE: MBT) said it had benefited from a stable competitive environment and "price rationality" in Russia, where it generates most of its sales. It blamed a 3% dip in net income -- to RUB14.3 billion ($210 million) -- on the adoption of new accounting measures. (See Russia's MTS Boosts Sales, Profits in 2017.)

  • Government authorities face criticism in Wales for delays to the rollout of broadband services to around 80,000 homes, according to a BBC report. Julie James, a Welsh government cabinet minister, is reported to have blamed the delays on "unforeseen issues" with the process for awarding contracts worth about £80 million ($103 million). James was further criticized after she said she could not be more specific about the hold-ups until contracts had been awarded, according to the BBC, with opponents slamming the "lack of transparency" as unacceptable.

  • Italy's Wind Tre said it had finished integrating networks in the city of Rimini following the merger between Wind and 3 Italia that brought the company into existence. The update comes after Wind complained earlier this month that US sanctions against ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), one of its main suppliers, had delayed work on the network modernization by around three months and affected its ability to retain customers. Wind said the Rimini integration followed upgrades in other cities, including Rome, Milan and Bologna, and had boosted 4G performance and coverage. Its current aim is to deploy around 21,000 sites throughout Italy that can support 4.5G services over a number of spectrum bands. (See ZTE Ban & Iliad Entry Blow Wind Tre Off Course.)

  • South African mobile operator Cell C enjoyed a 5% year-on-year increase in first-half revenues, to 7.8 billion South African rand ($540 million), according to local press reports, and narrowed its net loss by 33%, to ZAR645 million ($44.8 million). Despite the operational performance, shares in Blue Label Telecoms, which owns a 45% stake in Cell C, were down 8% on Tuesday due to concern about Cell C's leverage. According to Business Day, net debts equaled about ZAR7.3 billion ($510 million) at the end of June.

    — Iain Morris, International Editor, Light Reading

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