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Swisscom Buys a Bevy of PWLAN

Swisscom AG (NYSE: SCM) has made a bold bid to become Europe's public wireless LAN (PWLAN) powerhouse by creating a new business unit, Eurospot, and today acquiring two existing hotspot startups, Megabeam and WLAN AG (see Swisscom Targets Euro PWLAN, Swisscom Acquires Megabeam, and WLAN AG Bought By Swisscom).

The deals mark the first major instance of hotspot consolidation in Europe, where awareness of WLAN's potential in public and private is growing (see Europe Set for WLAN Boom). Financial details of the acquisitions were not disclosed.

Including the hotspots acquired today, Swisscom Eurospot now offers access via 800 public 802.11 access points in airports, hotels, conference centers, and train stations around Europe. That number will grow steadily throughout this year, as the Megabeam and WLAN AG units continue to build out.

Swisscom's move makes Megabeam the first of Unstrung's Top 25 Startups to be acquired. "This is a good result for everyone at Megabeam," says CEO Ryan Jarvis, stepping out of his champagne bath and tucking into a caviar sandwich. "Swisscom is adopting the Megabeam approach of building a pan-European footprint that will attract wholesale customers, such as mobile operators that want to offer hotspot access service," he adds.

Any such wholesale customers as yet? "There aren't any that have been announced yet," says the man who will now be Eurospot's VP of partnerships, concentrating on finding strategic partners and forging wholesale relationships. Unfortunately, Jarvis wasn't happy enough to divulge any financial details (the spoilsport), though he says Swisscom was not the only operator that was in talks to acquire Megabeam.

Today's news is also fine and dandy for Megabeam's VC backers, French company Remote Reward, and Italian investor AngelVentures (no Website found).

And the WLAN AG acquisition marks a "successful" return for its venture capital backers, Target Partners, Viventures, and Wellington Partners, only five months after they jointly invested €9 million in the German business.

And there may be more M&A action to come! Swisscom is keeping a close eye on possible further acquisition targets, according to company spokeswoman Pia "Private Eye" Colombo. “We plan to continue growing,” she tells Unstrung. “We will keep looking around to see which businesses match our strategy. We are ready to deliver whatever it takes to make this business successful.”

This could see Swisscom raiding its piggy bank for further capital, says Amrish Cacker, senior consultant at Analysys. “Today’s deals have certainly upped the stakes for WLAN business in Europe, but this isn’t a lead Swisscom will keep for long without further investment,” he warns. “This market is still something of a gamble.”

However, given the nascent stages of public WLAN development in Europe, Cacker reckons that Swisscom’s timing is perfect. “There’s no money in this market at the moment, so it could have got a very good deal. Both startups may have been struggling to make money, despite their decent technology.”

With only a thousand or so public WLAN hotspots currently live in Europe, the 800 access points Swisscom will be rolling out should make it ‘numero uno’ in this space. “The nature of WLAN is focused on quality of hotspots rather than quantity, and Swisscom has achieved this through the acquisitions,” Cacker adds. “It’s no good having 10,000 hotspots if they are all in small cafes. They need to be in places where people are really going to use them.”

So what's the best strategy for public WLAN hopefuls? Cast your vote, and see what other readers think, in this month's Unstrung poll.

— Justin Springham, Senior Editor, Europe, and Ray Le Maistre, European Editor, Unstrung

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