Inside telecommunications Issue 10

Mergers and acquisitions

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Introduction

Momentum in global M&A activity continues. The number of deals announced in Q2 2013 stood at 165, up from 148 in the preceding quarter.

Total deal value of US$21 billion was down 61% quarter-on-quarter. EMEIA accounted for 85% of deal activity in Q2 2013 with US$17.8 billion of announced transactions, while the Americas total was sharply down on the high levels of the previous six months. Deal value also fell in Asia-Pacific and Japan.

Top Telecoms M&A by deal value, Q1 2013

EY-Telecomm-Issue-10-graphic-7

Source: S&P Capital IQ, ThomsonOne, accessed April 2013.

Seeking scale and wider product scope in Germany

The largest deal of the quarter saw Vodafone bid US$10.1 billion in June for Kabel Deutschland, Germany’s largest cable operator.

Consolidation is also underway in the German mobile market. In July, Telefonica announced a cash and stock deal to acquire Germany’s smallest mobile operator for US$10.7 billion.

Assets change hands in Bulgaria, Croatia, and Ireland

The European market represents a hotbed of deal activity as operators reshuffle their portfolios and sharpen their focus on certain territories.

In June, Hong Kong-based Hutchison Whampoa acquired mobile operator O2 Ireland for US$1.1 billion in cash.

O2 Ireland’s Spanish owner Telefonica announced in April it was selling 40% of its assets in El Salvador, Guatemala, Nicaragua and Panama to multinational conglomerate Corporacion Multi Inversiones.

Norway’s Telenor announced it was acquiring Globul, Bulgaria’s number two mobile player with 36% market share, from Greece’s OTE for US$935 million.

In June, VIPnet, a subsidiary of Telekom Austria, acquired three regional cable network providers in Croatia, as part of plans to accelerate its convergence strategy. The country’s second-largest mobile provider acquired OKI and KTS, and the residential fixed-line assets of Metronete Telekomunikacije, a business service provider.

Asia-Pacific incumbents add capability in enterprise solutions

Asia-Pacific deal value for the quarter reflects a greater appetite for smaller acquisitions in the technology sector and beyond.

In June, Japan’s NTT bought US-based Solutionary, a managed security services provider, for US$210 million.

NTT Communications took a 74% stake in Digital Port Asia Limited, a Thailand-based data center established last year to address the need for business continuity planning in a country devastated by floods in 2011.

Telecom New Zealand acquired privately-held data center provider Revera for US$82.5 million in April.

Selected Telecoms M&A in Asia-Pacific

Date Bidder Target Stake (Value) Business nature of target
26 Jun 2013 Telstra Ventures (Australia) Kony Solutions (US) 100% (US$18.3 million) App developer
17 Jun 2013 NTT Corp (Japan) Solutionary Inc (US) 100% (US$210 million) Security service provider
4 Jun 2013 NTT Communications Corp (Japan) Digital Port Asia Limited (Thailand) 74% (US$40 million) Data center service provider
7 May 2013 Telstra (Australia);
Seven West Media (Australia)
HealthEngine na (US$11 million) Online health directory
28 Apr 2013 Telecom New Zealand Revera Limited (NZ) 100% (US$82 million) Integrity computing infrastructure and service provider
26 Apr 2013 NTT DoCoMo (Japan) Nihon Ultmarc Inc (Japan) 77.5% (US$26 million) Provider of medical database and contract research
26 Apr 2013 China Telecommunications Corporation E-surfing Media Co Ltd (China) 80% (US$194 million) Platform operating service provider for mobile Internet video
19 Apr 2013 Private investor (Cambodia) Sotelco (Cambodia) N/A Wireless telecom provider


Operators drawn to digital health

Enterprise demand for cloud and mobile solutions continues to grow, and Asian operators are now targeting specific industries in the midst of digital transformation. Healthcare is proving particularly attractive.

In May, Telstra and Seven West Media jointly invested US$11m in HealthEngine, on online health platform.

In April, NTT DoCoMo acquired a 77.5% stake in Japan’s largest medical database, Nihon Ultmarc. This forms part of NTT DoCoMo’s bid to expand its competencies in digital health services.