Russia's VimpelCom and Hong Kong's Hutchison Whampoa are said to be in talks with companies including Sky, Iliad, Fastweb and Tiscali about the sale of wireless assets as they look to win regulatory approval for their planned Italian merger. (See Eurobites: Italian Mobile Rivals Plan JV.)
The assets that are potentially on the table include wireless towers and spectrum holdings and could be used to set up a new mobile operator in the Italian phone market, according to a report from Bloomberg, which cites sources familiar with the matter.
A merger of VimpelCom Ltd. (NYSE: VIP)'s Wind Telecomunicazioni SpA and Hutchison Whampoa Ltd. (Hong Kong: 0013; Pink Sheets: HUWHY)'s 3 Italia would leapfrog Telecom Italia (TIM) to become Italy's biggest mobile operator, but it seems likely to face opposition from European Union regulatory authorities given the recent failure of merger attempts in the UK and Denmark. (See Eurobites: EU vetoes O2/3 combo.)
As in the UK -- where EU watchdogs recently blocked a merger between Hutchison's 3 unit and the O2 business of Spain's Telefónica -- consolidation in Italy would leave the country with just three mobile networks, prompting concern about the impact on competition.
Scandinavian operators Telenor Group (Nasdaq: TELN) and Telia Company (formerly TeliaSonera) last year abandoned similar attempts to merge networks in Denmark after they also encountered hostility at the EU level.
By offering to sell assets that could be used to support the entry of a fourth mobile operator, VimpelCom and Hutchison clearly hope to address the regulatory concerns surrounding competition.
According to the Bloomberg report, pay-TV giant Sky might join forces with France's Iliad (Euronext: ILD) or other players -- such as Fastweb SpA (Milan: FWB) and Tiscali SpA -- in a bid for the Wind and 3 assets, which could include about 5,000 towers and frequencies that are not being used.
Analysts have recently lashed out at the EU's antipathy to in-country consolidation, arguing that it will ultimately hinder investment in higher-speed, next-generation networks given the competitive pressure on the region's telcos.
Bengt Nordström, the CEO of consulting and analyst firm Northstream , thinks competition authorities are doing short-term damage to the European telecom sector by delaying the inevitable. "It will become quite clear in one or two years that not allowing consolidation will not make operators invest in networks," he recently told Light Reading.
— Iain Morris, , News Editor, Light Reading