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Inside Telecommunications: April to June 2011 - EY - Global

Inside Telecommunications: April to June 2011

Mergers and acquisitions

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Jonathan Dharmapalan 
Global Telecommunications Leader
Adrian Baschnonga 
Global Telecommunications Senior Analyst
Steve Lo 
Global Telecommunications Center: Beijing
Holger Forst 
Global Telecommunications Center: Cologne
Prashant Singhai 
Global Telecommunications Center: Delhi
Serge Thiemele 
Global Telecommunications Center: Johannesburg
Wasim Khan 
Global Telecommunications Center: Riyadh
Mike Stoltz 
Global Telecommunications Center: San Antonio

The biggest deal of the year remains the proposed US$39b acquisition of T-Mobile USA by AT&T, announced in March.

Summary: M&A deals in Q2 11 were slightly higher than in Q1 11.

M&A in Q2 2011

During Q2 2011, there were a total of 108 mergers and acquisitions (M&A) worldwide, with a total deal value of US$29.4b. This compares to 93 deals during the first three months of 2011, with a total deal value of US$55.6b.

The biggest deal of the year remains the proposed US$39b acquisition of T-Mobile USA by AT&T, announced in March.

Top 10 M&A, 1 April 2011–20 June 2011

Source: FactSet Mergerstat

Transactions by geography

EMEIA had the most deals in 2Q11, with a value of US$13.7b.

M&A deal number and deal value by area (US$b)

Source: FactSet Mergerstat

Footprint growth in Russia

Several deals in Russian telecom markets took place in Q2 2011, as scale and product scope considerations loom large for leading players.

  • In June, VimpelCom acquired 90% of mobile player New Telephone Co JSC, adding 1.5 million users and strengthening the operator’s position in the Far East region of Russia.
  • This followed the April acquisition of Pskovline, a local broadband provider in the northwest of the country.
  • Sweden-based Tele2 AB had been working to boost its Russian presence through a negotiation to purchase a 97% stake in SMARTS Group, a mobile operator in the Volga region with a coverage area of 34 million people. However, Tele2 has since withdrawn its offer against a backdrop of uncertainty between shareholders of the target operator.1

European heavyweights move away from minority interests

European’s largest telecom players are displaying more caution than emerging market players.

In June, France Telecom Group outlined long-term plans to sell assets where it is not a majority shareholder, as part of its Conquests 2015 strategic program.2

France Telecom’s stance on minority interests echoes that of Vodafone Group, which divested its minority stake in French mobile operator SFR in April. However, the UK-based player is monitoring consolidation opportunities in the European market.

Ownership and competition considerations in Asia Pacific

Ownership and competition issues have been hot topics during the second quarter in the Asia Pacific region.

Operators remain keen to tap the growth potential in emerging Asia.

  • Interest is rising in Indonesia following further liberalization of the telecoms sector.
  • Japanese telecos continue to be active in the M&A market, as they target a wider product mix and service capability in ICT and e-commerce.

Asia Pacific telecoms M&A

Date Bidder Target Stake (US$) Business nature
10 Jun 2011 KDDI (Japan) WebMoney (Japan) 100% ($149m) e-cash settlement company
24 May 2011 KDDI (Japan) HKColo.Net (Hong Kong) 50% (not disclosed) Data center operator
11 May 2011 NTT Communications (Japan) Frontline Systems (Australia) 70% ($67m) IT infrastructure, consulting and managed service provider
27 Apr 2011 VimpelCom (Russia) GTEL Mobile (Vietnam) Increase stake from 40% to 49% ($196m) GSM mobile operator
7 Apr 2011 M2 Telecommunications (Australia) Edirect Pty (Australia) $5m Mobile service provider
29 Mar 2011 PLDT (Philippines) Digitel Telecommunications (Philippines) 51.55% ($1.741m) Fixed and mobile operator
16 Mar 2011 China Mobile (China) Topssion Co. (China) 100% ($36m) Mobile terminal distributor

1 “Tele2’s offer to buy SMARTS invalid,” SKRIN Newswire, 28 July 2011.
2 “France Telecom-Orange presents its strategic and financial ambitions for 2011–2015: adapt to conquer,” France Telecom, 31 May 2011.

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