Inside telecommunications Issue 9

Mergers and acquisitions

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Introduction

The first three months of 2013 were another strong quarter for deal activity in telecommunications.

Deal value stood at US$53.8b, up a little from the US$47.7b registered in Q4 2012. The number of deals announced stood at 148, down 20 from the preceding quarter.

The Americas continued to lead the way in deal activity, accounting for 54% of global deal value by target area. EMEIA registered an uptick compared with the previous quarter, with announced deals standing at 42% of the global total. Inbound Asian deals were down from the preceding quarter.

Figure 7: Telecoms M&A deal value by target area, Q1 2013 (US$b)

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

Spectrum needs accelerate acquisitions

Operators’ mobile spectrum needs are driving a number of transactions. In January, US-based AT&T acquired 37 lower 700MHz B block licenses from Verizon Wireless, for US$1.9b. In exchange, AT&T passed on 10MHz of AWS spectrum to its rival covering Western markets.

January also saw AT&T acquire the US retail operations of Atlantic Tele-Network (ATNI) for US$780m in cash. In the same month, Dish Network made a US$4.9b bid for US mobile operator Clearwire, threatening the takeover announced the preceding month by majority owner Sprint.

In April, Dish made another ambitious move, offering to buy Sprint itself for US$25.5b (this deal is not included in our Q1 2013 data).

In France, Bouygues Telecom received a US$895m cash injection from parent company Bouygues. This operation had been agreed to late last year to offset the operators’ US$1.3b in LTE spectrum.

Cable footprint growth makes waves in Europe

The largest deal of Q1 2013 was US-based Liberty Global’s cash-and-stock acquisition of UK cable operator Virgin Media for US$23.3b.

The US player also acquired a 12.7% stake in Dutch cable operator Ziggo for US$811m in March. Earlier, in January, Liberty Global had also increased its stake in Belgian cableco Telenet from 50.2% to 58%.

The rapidly expanding cable TV provider is now considering a European listing.

Figure 8: Top telecoms M&A by deal value, Q1 2013

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

Sizing up opportunities in South Asia

In January, Singapore’s SingTel announced that it had decided to sell its 30% stake in Pakistan’s Warid Telecom to the Abu Dhabi Group for US$150m.

Bahrain’s Batelco was reportedly in talks with India’s Reliance Communications to acquire a stake in the latter’s enterprise business. However, Batelco backed out of talks in April to acquire Reliance Globalcom, which owns undersea cable business Flag Telecom.

Reliance is reportedly in talks with a consortium of global private equity investors regarding a takeover of the international enterprise unit.4 In March, AT&T was reported to be considering a minority stake in Reliance Jio Infocomm Ltd., which aims to be the first player to launch nationwide 4G. 5

More consolidation in Australia

Q1 2013 saw some additional deals announced in Australia’s broadband market.

In March, Melbourne-based M2 Telecommunications Group announced it would acquire rival players Dodo Australia Holdings Pty and Eftel Ltd. for US$252m via a mixture of cash and shares.

Going forward, M2 Telecommunications is well positioned to grow its share of customers in the consumer and SME segments.

Figure 9: Top telecoms M&A in Asia-Pacific, Q1 2013

 

Date Bidder Target Stake (value, US$) Business nature of target
18 Mar 2013 M2 Telecommunications Group (Australia) Eftel Limited (Australia) 100% ($39.6 million) ISP and broadband service provider
17 Mar 2013 M2 Telecommunications Group (Australia) Dodo Australia Pty (Australia) 100% ($212 million) Broadband and mobile service provider
5 Feb 2013 Asia Outsourcing Gamma Limited (Philippines) SPi Global Holdings (Philippines) 80% ($320 million) Voice and non-voice BPO provider
30 Jan 2013 NTT DoCoMo (Japan) MagaSeek Corporation (Japan) 75% ($22 million) Online fashion good shopping company
29 Jan 2013 Abu Dhabi Group (UAE) Warid Telecom (Pakistan) 30% ($150 million) MNO
13 Jan 2013 CITIC Telecom International (Hong Kong) Companhia de Telecomunicacoes de Macau 79% ($1,161 million) Integrated operator

Source: Mergermarket, Telecom Asia, Factiva, accessed April 2013


4“Batelco Backs Out of Reliance Talks,” The Wall Street Journal, 20 April 2013
5“AT&T Plans Mukesh Ambani Reliance Jio Stake,” The Times of India, 9 March 2013