Inside telecommunications Issue 11

Mergers and acquisitions

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Introduction

While total announced deal volume declined slightly from 165 in Q2 2013 to 155 in Q3 2013, total deal value of US$173 billion represents a more than eightfold increase from the US$21 billion registered in Q2 2013.

The US$130 billion acquisition by Verizon Communications of Vodafone’s 45% stake in Verizon Wireless accounted for 75% of deal value in the three months to September. Even without this sizable transaction, deal value increase more than twofold from 2Q13.

Roughly 40% of deal volume came from the US, one-third of deal volume from the European region, and no deals were made in Japan during the quarter.

EY - Telecoms M&A deal value by target area

Verizon gains full control of its wireless assets

In the third-largest corporate deal in history, Verizon Communications has taken full control of its subsidiary Verizon Wireless, acquiring the 45% stake held by UK-based Vodafone for US$130.1 billion. The transaction consists of a combination of cash (US$58.9 billion), Verizon common stock (US$60.2 billion) and other items.

Mobile consolidation moves forward in Germany

Consolidation remains a key theme in the European telecommunications industry, and Germany has been the scene of some of the biggest deals worldwide this year. In July, Dutch incumbent KPN and Spain’s Telefonica announced plans to merge their assets in Germany, with the aim to unlock mobile synergies estimated at €5 billion in the quarter’s second-largest deal.

Assets change hands in Africa

A long-running acquisition saga in Morocco recently ended with UAE-based Etisalat acquiring a 53% controlling stake in Moroccan incumbent Maroc Telecom for US$5.7 billion.

Additionally, India’s Bharti Airtel acquired Warid Telecom in Uganda, adding an additional 2.8 million customers to its Ugandan operations to take its mobile market share to 39%. The India-based mobile operator also acquired Warid’s Congo Brazzaville operations.

EY - Top Telecoms M&A by deal value

Consolidation continues in Indonesia

In-market acquisitions have proved an enduring theme in Indonesia, one of the world’s largest telecommunications markets.

In September, PT XL Axiata (XL), the Indonesian mobile division of the pan-Asia operator Axiata Group Berhad, announced the acquisition of mobile rival PT Axis Telekom Indonesia from Saudi Telecom and Teleglobal Investments in a deal worth US$865 million. As a result of the acquisition, number three player XL will increase its subscriber base from 54 million to 65 million, in the process becoming the second-largest mobile operator behind Telkomsel, which has 120 million subscribers.

In September, PT Centrin Online – an Indonesian provider of dial-up, internet, data center and hosting services – announced the US$9.4 million acquisition of a 99.9% stake in PT Indo Pratama Teleglobal, an ISP offering internet access, internet telephony, data center, broadband wireless access and disaster recovery.

Integrated incumbent Telkom Indonesia paid US$4.5 million in August to raise its stake from 40% to 80% in Patrakom, an Indonesian provider of fixed-line services. This follows a deal in June where CT Corpora, a media content owner, took an 80% stake in Telkomsel’s pay-TV unit, Indonusa Telemedia.

EY - Selected telecoms M&A in Asia-Pacific