telecom finance 227
TRANSCRIPT
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Americas
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Q&A
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Middle East
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The definitive news source on raising finance
WESTERN EUROPE
Altice hires
advisers for PT bid
Q&A
Orange head of Europe
Gervais Pellissier
AMERICAS
Iliad drops T-Mobile
US ambitions
Issue 227 October 2014 www.telecomfinance.com
Telcos yet to unlock full potential of M2MTelcos yet to unlock full potential of M2M
MAKING THE CONNECTIONMAKING THE CONNECTION
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Now in its 10th year, theTelecomFinance Conference remains the
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advisers, investors and ocials in the global telecoms space.
Exploring ongoing key industry themes, includingM&A, regulation and
nance, the event also examines future revenue streams as telecoms
become evermore commoditised and challenged by advances in
other communications technology.
Key themes in our 2015 programme include:
The new European Commissions take on continental champions
The return to big convergence
Monetising infrastructure where does it end?
Fibre: the undercover, unregulated side of telecoms
Investorsnew darling: satellite
Book your delegate pass now to join the debates with our panels
of industry leaders, including:
HythemEl-Nazer, Principal,TAAssociates
Steve Collar, CEO,O3bNetworks
KarimMichel Nasr, CEO,DigitalWorld Capital
AndrewCole,Director, Liberty Global
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Operators across the globe are increasingly
foraging adjacent markets as they aim
to become all-round, diversied players.
Softbanks recent investments in Legendary
Entertainment and DramaFever, and Liberty
Globals purchase of All3Media are the most
recent examples of telcos strengthening their
content strategy.
Yet one sector remains relatively untapped
by operators: machine-to-machine (M2M)
and, more generally, the Internet of Things
(IoT). This industry, which encompasses
all sorts of services involving the wireless
connection of devices to the internet, is a
potential goldmine if Ciscos gures are to be
believed. According to the network systems
company, the sector is set to become a
US$19trn global opportunity by 2024.
Telecoms providers are in pole position
to make the most of IoT: comprehensive
wireless network coverage is key to
connecting cars, homes, utilities etc., to
mobile phones and other similar devices.
Yet, in the last couple of years, Verizon
Communications and Vodafonewere the
only notable operators to have been active
in M2MM&A deals.
In July 2012, US telcoVerizon bought
Hughes Telematics, a maker of wireless
systems for vehicles, in a US$612m deal. At
the time, John Stratton, president of Verizon
Enterprise Solutions, commented: Machine-
to-machine services are beginning to play a
vital role reshaping the business landscape
and setting new consumer expectations
about establishing valuable connections in
their vehicles, their homes and the world
around them.
It took a further two years to see another
telco conclude a similar deal. In August
2014, UK operator Vodafone acquired Italian
vehicle tracking and telematics group Cobra
Automotive Technologies for 193m. The
telco described the acquisition of Cobra as
being in line with its strategy to expand its
M2M offering, backing up the purchases of
Zelitron, Device Insight and X-Link.
But these companies are the exceptions to
the rule, as most other operators have so far
opted for M2M partnerships instead.
This approach provides a fast route to
market, but gives the operator limited control
over the service and only a small share of
revenue, explains Tom Rebbeck, research
director at AnalysysMason.
A few failures have so far deterred many
telcos from opting for the M&A route, but
acquisitions are the only way forward for
those looking to make the most of M2M,
Rebbeck asserts. Telecoms operators need
to decide how seriously they want to make
a play in M2M, he says. His special report
on telecoms operators and the IoT andM2M
market is on pages 48-49.While M2MM&A is
still relatively subdued, convergence deals are
on the up, as illustrated byOranges recent
3.4bn bid for Spanish xed-line operator
Jazztel.With this offer, the French incumbent
aspires to become Spains second-largest
xed-line broadband player. For this edition
of TelecomFinance, senior reporter Guy
Ferneyhough secured an exclusive interview
with Gervais Pellissier, Orange CEO delegate
and, since September, head of European
operations. Besides detailing the companys
rationale behind the Jazztel offer, the senior
executive also discussed Oranges strategy
in several of its European markets, stressing
the importance of convergence. The full
interview is on pages 16-17.
Elsewhere in Europe, Altice is also
positioning itself for a potential
consolidation deal. The telecoms holding
already owns xed-line assets in Portugal
and is now understood to be setting its sights
on the countrys incumbent, Portugal
Telecom (PT).
PTs parent company, Brazilian telcoOi,
has so far remained evasive about its plans
for the operator, only stating that it may sell
some assets. In Brazil, however, Oi seems
more determined. Its interim CEO Bayard
Gontijo was quoted as saying that a merger
with a Brazilian rival would speed up its
nancial recovery, with TIM in its line of
sight. CFO Gontijo replaced Zeinal Bava,
who resigned in early October, further
fuelling speculation that the Oi-PT merger
could unravel.
Also, in this issue, Guy Ferneyhough looks
at real estate investment trusts (REITs) and
how spinning off assets into such trusts could
help xed-line and cable operators unlock
signicant value. The feature is on page 47.
Finally here in London our events team
has been busy signing up speakers for
TelecomFinance 2015, our annual conference
which will take place for the 10th time on 5
February.We are delighted to conrm that
Steve Collar, CEO of O3b Networks, Andrew
Cole, a director at Liberty Global, Hythem El-
Nazer, principal at TA Associates, and Karim
Michel Nasr, CEO of DigitalWorld Capital,
will be among the telecoms deal makers,
executives and industry experts discussing
the sectors hot topics at the Guoman Tower
Hotel in London.
For a full list of speakers, programme and
latest updates, go to our events website
www.telecomnancelive.com. Please get
in touch for more information.
4 Western Europe
4 Orange moves for Jazztel
6 Tele Columbus IPO on ice
8 Altice pursues PT
16 Q&A: Orange head of Europe
Gervais Pellissier
18 Eastern Europe
18 Operators eye Tusmobil
20 PPF asks O2 CR for US$1.1bn loan
21 PM backs Telekom Slovenije sale
22 Middle East / Africa
22 Oi to sell Africatel
23 BTCL IPO in November
27 Viettel to enter Tanzania
28 Asia
28 STP buys XL Axiata towers
31 Softbanks Alibaba stake worth
US$75bn
36 Americas
37 Oi CEO steps down
39 Vimpelcom exitsWind Mobile
42 Iliad gives up on T-Mobile US
47 REIT opportunity
48 Special report
IoT and M2Mmarket
50 Mandate table
53 Networks
contents
telecomfinance
issue227October 2014
TelecomFinance
Editor: Pauline Renaud
Senior Asia correspondent: Jason Rainbow
Senior reporters Lorna Thornber
Guy Ferneyhough
Valeria Camerino
Sales manager: Jeff Jones
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Subscriptions manager: Dave McCall
+44 207 963 7659
Design / production: Luke Thornhill,
Richard Preston
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ISSN: 1352-6456 VAT No 590 6285 16
2014 The Press Association Ltd
www.telecomfinance.com
viewpoint
Untapped M2M and
IoT opportunities
Pauline Renaud
Editor,
TelecomFinance
www.telecomfinance.com 3
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4 www.telecomfinance.com
western europe
TDC snaps upNorwegian cableco Get for US$2.2bn,
Altice eyes Ois Portugal Telecom, and Tele Columbus has
second thoughts on IPO
French incumbentOrange has made a
3.4bn (US$4.4bn) bid for Spanish xed-
line operator Jazztel in an effort to bolster
its position in the highly-competitive
local market.
Orange is offering 13 per share in cash
for 100% of Jazztel shares, representing a
34% premium on the volume-weighted
average closing price over the 30 trading
days to 16 September.
The offer values Madrid-listed Jazztel at
8.6 times its projected 2015 EBITDA, taking
expected synergies into account, the Paris-
based company said.
Orange, which owns Spains second-largest
mobile operator by clients, estimates the
combined entity will generate up to 1.3bn
in global synergies, largely due to savings
in operational expenditure and network
investments.
The offer is conditional upon at least
50.01% of Jazztel shareholders tendering
their shares.
Jazztel chairman Leopoldo Fernandez
Pujals has agreed to sell his 14.48% stake and
other company directors, including CEO
Jose Miguel Garcia Fernandez and general
secretary Jose Ortiz Martinez, will also take
part in the tender.
Some of Jazztels shareholders rejected the
offer, saying it undervalued the company.
Orange CEO Stephane Richard
subsequently stressed that his company
would not raise its offer, which he says is very
attractive and represents a 67% premium on
Jazztels market cap at the end of 2013.
To nance the acquisition, Orange has
issued about 3bn (US$3.8bn) worth of
hybrid bonds, split into three tranches.
The operator has priced 1.25bn
(US$1.6bn) of 5% notes at 98.9 to yield
5.125%, equivalent to 412.8 bps over mid-
swaps. They have a seven-year rst call date.
It has also priced a 1bn (US$1.28bn) 4%
bond at 99.253 to yield 4.125%, equivalent to
365.7 bps over mid-swaps, with a 12-year rst
call date. Finally, Orange has priced 600m
(US$980m) worth of 5.75% notes at 99.222
to yield 5.875%, equivalent to 342.6 bps
over mid-swaps. They have an 8.5-year rst
call date.
All three bonds are perpetual. Orange said
investors have expressed a strong interest,
with total orders of over 11bn.
Lead managers on the offering, which was
rated Baa3 by Moodys, were BBVA, Citigroup,
Morgan Stanley andNatixis.
The bonds will be accounted as equity
under IFRS rules and will be granted a total
1.5bn equity credit by rating agencies.
The issue allows Orange to strengthen
its balance sheet at a cost of 4.5%, below
the average cost of its existing bonds, the
operator said.
The French telco noted that, given
the strength of its balance sheet, Jazztel
acquisition offer was not conditional upon
obtaining nancing.
However, it is subject to the approval of
relevant authorities, including the Spanish
Securities Commission (CNMV) and the UK
Takeover Panel. The latter will review the deal
as Jazztel has its registered ofce in the UK.
Richard was quoted on a conference call
with analysts as saying he expects the deal
to be subject to only a phase I competition
review.
The deal is scheduled to close in the rst
half of 2015. Bank of America Merrill Lynch
reportedly advised Orange on the transaction.
Number two player
Orange said the deal would create the
second-largest xed-line broadband operator
in Spain, as well as a dynamic mobile player,
pushing customers towards convergent offers.
In an economic context that has
continued to recover, this operation will
enable Orange to accelerate its growth in a
highly-competitive market.
Spains largest mobile operators are
Telefonicas Movistar andVodafone.
TeliaSonera-controlled Yoigo is the fourth
player behind Orange.
IHS Technology senior analyst James
Allison noted that an Orange Spain-Jazztel
merger would create an operator with a 25%
share of the Spanish broadbandmarket.
The acquisition of Jazztel would add 2.2
million homes passed with bre-to-the-home
technology, he said in a note to investors,
adding that it would also give Orange an extra
1.5 million MVNO customers.
In Allisons view, the offer is partly a
response toVodafones recent expansion in
Spain with its acquisition of cableco Ono
for 7.2bn.
As a result of the offer, Jazztel will pull out
of talks with TeliaSonera to buyYoigo. The
Spanish and Swedish telcos conrmed in
September that negotiations were underway.
However, during the call with analysts,
Richard was quoted saying that the company
does not need to acquire Yoigo and will focus
on combining its Spanish unit with Jazztel.
That said, Richard added that the company
supports consolidation in general and will
consider playing a role at a later stage if it is
able to.
For the past fewmonths, Orange has
repeatedly said it was interested in playing an
active role in Spain via acquisitions. Orange
CEO delegate Gervais Pellissier discloses
more details about the Jazztel deal in an
exclusive interview on page 16-17.
Orange offers 3.4bn for Jazztel
SPAIN
Telco says deal would create Spains second-largest broadband player
Orange CEO Stephane Richard
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western europe
www.telecomfinance.com 5
The Austrian arm of German food retail giant
Aldi Sud is in talks with T-MobileAustria
about launching anMVNO on its network, as
it looks to become a beneciary of Hutchison
Whampoas takeover of Orange Austria.
Supermarket chainHofer is aiming
to launch at the beginning of next year,
according to local media, and is reported to
be working with Ventocom, a prospective
virtual operator led by Orange Austrias
former CEOMichael Krammer.
T-Mobile Austria told TelecomFinance
that Krammer struck a deal for Ventocom to
operate anMVNO, but would not comment
on whether it would be serving Hofer
customers. Hofer did not reply to a request
for comment.
In mid-September, T-Mobiles CEO Andreas
Bierwirth said he expected a number of new
MVNOs to enter the market early next year.
Hutchisons 1.3bn acquisition of Orange
reshaped Austrias telecoms landscape,
reducing the number of operators in the
mobile market from four to three, and
was only allowed after substantial remedies
were agreed.
One of the commitments Hutchison
made was to offer up to 30% of its network
capacity to as many as 16 MVNOs over the
next 10 years.
In spite of the remedies, Austrian antitrust
regulator BWB said there has been signicant
price increases in the country following
the deal.
In late August, it launched an investigation
into the price rises and requested information
from operators.
Supermarket plans MVNO
AUSTRIA
In-depth review for
Telenet-De Vijver deal
The European Commission (EC) has
launched a Phase II investigation into
Belgian cableco Telenets proposed
acquisition of Flemish broadcasterDe
VijverMedia.
In June, the Liberty Global subsidiary
agreed to buy 50% of DeVijver by indirectly
acquiring Finnish group Sanomas 33.3%
stake in the TV network for 26m and
injecting 32m into the business in
exchange for stock.
The EC is concerned that as Telenet
is Flanders leading cableco and
DeVijver owns two of the regions most
popular Dutch-language free-to-air
TV channels, the transaction may lead
to competitors being cut out of the
Flemish market.
It is worried that the tie-up could
weaken Telenets competitors by either
making it more difcult for the buyers
rivals to get access to its cable platform,
and/or that access conditions for
DeVijvers two channels may worsen. Given
the importance of the Telenet platform
to reach end users in Flanders, such a
strategy of shutting out competitors may
negatively impact the ability of these
channels compete and to innovate, the
Commission said in a statement.
The EUs antitrust watchdog is worried
that if its fears are realised then consumers
could end up paying higher prices.
Liberty notied the Commission of the
transaction on 18 August and the regulator
said the deadline for its decision has been set
for 5 February 2015.
When the deal was announced in
June, Telenet said it would not be
consolidating DeVijver and that its
participation in the TV network would not
result in changes to the agreements it has
with other television providers.
The remaining 50% of DeVijver is
split between its CEOWouter
Vandenhaute and his business partner
ErikWatte, who together own 25% through
their companyW&W, and local media
group Corelio, which holds the nal 25% of
the company.
BELGIUM
Vendor Alcatel-Lucent has completed the
sale of a majority stake in its Alcatel-Lucent
Enterprise subsidiary to ChinaHuaxin.
Alcatel, which will retain a 15% interest in the
unit, expects to receive cash proceeds of 202m
(US$255m) from the transaction.
The equipment company entered exclusive
talks with China Huaxin in early February, after
receiving a binding offer from the technology
investment company for the unit.
At the time, it was reported that Lazardwas
advising Alcatel on the sale. The subsidiary,
which claims to have over 2,700 employees
worldwide and operations in more than 80
countries, will be headquartered in Colombes,
near Paris.
Alcatel said in a statement that the
divestment forms part of a strategic plan
launched in June 2013 to refocus itself as a
specialist in IP, cloud and ultra-broadband
access, while realigning its balance sheet,
implementing cost savings of 1bn and
generating at least 1bn through selective asset
sales by the end of 2015.
In August, the vendor revealed that it was
considering launching an IPO for part of its
submarine cables unit in the rst half of 2015.
Alcatel closes
enterprise unit
sale
FRANCE
Fresh from its acquisition of German bre operator Versatel in
September, ISPUnited Internet is eyeingmore purchases as it
continues its efforts to consolidate Germanys broadbandmarket.
United Internet plans to expand its network and sees
further opportunities to buy smaller operators, its CEO
Ralph Dommermuth told a local publication without naming
specic telcos. At the start of September,United Internet
agreed to pay 586m (US$770.3m) for private equity rm
KKRs 74.9% stake inVersatel and assume the telcos 361m
(US$474.5m) debt.
TheVersatel acquisition strengthened United Internets
position as Germanys number two DSL provider, behind
DeutscheTelekom.
The ISP will be able to boast 4.12million subscribers when the
deal closes,which is expected to happen during October subject
to antitrust approval.
United Internet targets more buys
GERMANY
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6 www.telecomfinance.com
western europe
German cableco Tele Columbusplans to
raise at least 300m (US$378m) through an
IPOmay be put on hold, following a slump in
European equity markets.
On 30 September, Tele Columbus
announced its intention to list before the end
of the year but, two weeks later, it released
another statement noting market uncertainty
and said it would continue to monitor the
exchanges.
Since the cable operator revealed its
plan to oat, two German tech companies
e-commerce group Rocket Internet and
online retailer Zalando have experienced
disappointing IPOs.
German classieds group Scout24, sold by
Deutsche Telekom to private equity last year,
was also planning to list on the Frankfurt
bourse before the end of the year. However,
reports suggest it has postponed that move
until 2015.
In contrast, local property company TLG
Immobilien is still set to push ahead with
its listing. In mid-October, the German
government slashed its economic growth
forecast for this year and next. It now projects
1.2% growth in 2014, down from its previous
estimate of 1.8%, and expects only 1.3%
growth rather than 2% for 2015.
The German economy, which could be
heading for a technical recession, has been
hit by the poor performance of its Eurozone
trading partners and the geopolitical crises
on the eastern border of Ukraine. Tele
Columbus possible IPO entails selling
existing equity and issuing new shares. The
company has not indicated howmuch of its
stock will be listed on the Frankfurt bourse or
whether some of its current investors will take
the opportunity to exit.
Germanys third-largest cableco will use
the proceeds to cut its debt and is planning a
renancing, which will reduce its leverage to
around 3.5x normalised LTM EBITDA.
Tele Columbus, owned by several hedge
and credit funds via a Luxembourg-based
holdco, mandated Goldman Sachs and JP
Morgan at the start of the summer to work on
a listing. BofA Merrill Lynch and Berenberg are
listed as joint bookrunners and Rothschild is
Tele Columbus nancial adviser.
Tele Columbus management is bullish
about the companys prospects. CEO Ronny
Verhelst said: The signicant growth
potential of Tele Columbus is based on one
of the best performing cable networks in
the Germanmarket and a very attractive
customer base with signicant potential
for selling additional products and services
beyond cable TV services.
British telcoVodafone acquired Tele
Columbus larger rival Kabel Deutschland
(KDG) for an enterprise value equivalent to
11.9x its EBITDA in 2013. Meanwhile, Liberty
Globals recent acquisition of Ziggo valued it
at 11.3x EV/EBITDA, andVodafones purchase
of Spanish cableco Ono equated to around
10.5x EV/EBITDA.
Tele Columbus is an integrated level 3/
level 4 operator and claims to have 1.7 million
connected households as of the end of June.
It offers cable television, broadband and
telephony, and recorded 207.7m in revenue
for 2013 and 89.6m EBITDA.
In 2013, KDGmade an unsuccessful
attempt to acquire Tele Columbus,
meeting resistance from the German
antitrust regulator.
Chairman appointed
Meanwhile, the cableco has appointed a
chairman to its new supervisory board, ahead
of the IPO announcement and converted into
a stock corporation to facilitate the expansion
plan. Frank Donck, a former supervisory
board chairman of Belgian cableco Telenet,
leads the three-member supervisory board.
The other members are Carsten Boekhorst,
a partner with the UKs Pamplona Capital
Management, and former Belgian prime
minister and OECD vice president Yves
Leterme.
Tele Columbus Holding, the operating
arm, is now known as Tele Columbus AG. In a
statement, the group stressed that the change
in legal form and name has no impact on its
operating business or registered ofce, which
will remain in Berlin.
Verhelst said the conversion into a stock
corporation completes the structural and
organisational realignment we have been
implementing over the past years.
The new legal form also gives us more
exibility for additional growth and the future
development of Tele Columbus.
Tele Columbus 300m
IPO in doubt
GERMANY
Frances competition authority has rejected
incumbentOranges request to immediately
suspend a plannedmobile network sharing deal
between two of its rivals,BouyguesTelecom
and SFR.
The regulator justied its decision by saying
the agreement did not pose a serious or
immediate threat to either Orange, consumers
or the sector.
Early this year, SFR andBouygues agreed to
jointly operate 11,500 towers that would enable
them to cover 57%of Frances population.They
also have a temporary 4G roaming agreement
in place that runs until the end of 2016. In
May, the incumbent led a complaint with the
authority, arguing that the agreement
was anticompetitive because it covers a large
area of the country. Orange alsowanted the
deal to be suspended until SFRwas actually
sold to local cablecoNumericable, so the
impact on the French telecoms landscape
could be better assessed.
ConglomerateVivendi agreed to sell SFR
to Altice and its Numericable unit earlier this
year. However, Orange is concerned that the
converged entity will compete directly with its
operations. Its CEO Stephane Richard said a few
months back that his companywas planning
to also complain to the regulator about certain
aspects of the proposedmerger.
Orange has said it will appeal the authoritys
decision on the Bouygues-SFR network
deal and stressed that only its request for an
immediate suspension has been rejectedwhile
a decision regarding its complaint has not yet
been taken.
A spokesperson for the company added:
Wewill be extremely vigilant as to the effects
on competition once SFR actually start using
Bouygues 4G network, andwe reserve the
possibility of ling an additional request for the
immediate suspension of the contract based on
factual elements.
Bouygues-SFR network deal to go ahead
FRANCE
Cableco pauses for thought as German economy sags
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www.telecomfinance.com 7
western europe
Spanish incumbent Telefonica has nalised its 8.6bn
(US$11.34bn) acquisition of Germanmobile operator E-Plus from
Dutch telcoKPN.
As previously agreed, the Spanish group will retain a 62.1% stake
in its local unit Telefonica Deutschland, which now includes
100% of E-Plus,while KPNwill hold a 20.5% interest in the
combined entity which is subject to a lock-up period of 180 days.
The remaining shares are publicly traded.
Telefonica said the deal enables it to become the largest mobile
player in Germany with around 41millionmobile accesses,
combined revenues of approximately 8bn and expected synergies
of 5bn.
The Spanish group also said it is now the second-largest
operator in Europe in terms of subscribers and revenues.
Thanks to the conclusion of the acquisition of E-Plus, the
recent acquisition of GVT and the commercial revolution which
has transformed the Spanishmarket,Telefonica has gained a
leading position in three of its most importantmarkets: Germany,
Brazil and Spain, commentedTelefonica.
Rights issue
At the end of August, the European Commission rubber-stamped
the deal after a lengthy regulatory review.To secure approval,
the companies agreed to guarantee local MVNOs access to their
networks in order to preserve competition.
To nance the 5bn cash consideration of the deal,Telefonica
Deutschland raised 3.6bn through a rights issue, selling over
1.11 billion shares at 3.24 each.Telefonica Deutschland gave
shareholders the right to buy one new share for each existing share
they already owned.
Citigroup,HSBC,Morgan Stanley andUBSwere joint global
coordinators.BofAMerrill Lynch and JPMorgan acted as joint
bookrunners,while Santander,Bayerische Landesbank,BBVA,
BNP Paribas,Commerzbank,Mediobanca andUnicreditwere
joint co-leads.
Meanwhile, its parent issued 1.5bn worth of convertible notes.
E-Plus CEO Thorsten Dirkswill head the combined company.
Telefonica Deutschland CFO Rachel Empey and COOMarkus Haas
will continue in their respective role on themanagement board of
the new entity.
GERMANY
Incumbent Eircom has shelved plans for an
initial public offering that could have raised
as much as 1bn (US$1.3bn) after concluding
the strategic review it began in April.
In a statement, Eircom said there were
encouraging signs of positive momentum in
its business and its decision had the backing
of its key shareholders.
Eircom investors would prefer to
continue participating in the upside from
the signicant network investment made in
recent years, which has only recently begun
to manifest itself in the companys operating
and nancial results, the operator said.
Reports have suggested Eircoms
shareholders valued the business at 3bn
(US$3.9bn) and had hoped to raise 1bn, but
they could not convince potential investors
that their valuation was justied.
Alongside an IPO, Eircoms advisers
Goldman Sachs,Morgan Stanley and
Rothschild were also sounding out potential
buyers. Operators Vodafone and Deutsche
Telekom, as well as private equity rms KKR,
Apax Partners and CVC were all reported to
have discussed potential deals, but none of
these talks resulted in an offer.
In late August, Eircom won the consent of
its shareholders, bondholders and lenders
for a corporate reorganisation, which would
have seen it incorporate in Jersey and be a tax
resident in Ireland. This would have
given Eircom greater exibility to pay
dividends to shareholders in the future
if it chose to list. It is yet to take up the
reorganisation option but could choose to if it
revisits an IPO further down the line.
A banker not involved in the talks told
TelecomFinance that Eircoms investors may
look at an IPO again in a year or so, once the
company sees its results increase.
CEO leaves
Ten days after the strategic review ended,
the incumbent announced the departure
of its CEO.
Herb Hribar returned to the US after two
years with Eircom. The board appointed
CFO Richard Moat as acting CEO with
immediate effect.
Commenting on the CEOs exit, Eircoms
chairman, Padraig McManus, said: He has
tirelessly dedicated himself to reshape the
company ...We now operate Irelands largest
bre network and Eircom was the rst to offer
4Gmobile services in Ireland. All of this was
achieved while reducing our cost base and
improving our competitiveness.
McManus continued by saying that the
experience, knowledge and enthusiasm
of Moat would keep the business on an
even keel.
An IPO this year would have come just
two years after the group was taken over by
its bondholders, which snapped it up from
an administration process. That takeover
saw US-based private equity rm Blackstone
become Eircoms largest shareholder.
Eircom rules out IPO
IRELAND
Telefonica closes E-Plus deal
Herb Hribar has
left Eircom
-
Luxembourg-based telecoms holding
Altice is negotiating the acquisition ofOis
PortugalTelecom (PT) and has hired
Goldman Sachs andMorgan Stanley to advise
it on a bid, TelecomFinance has learnt.
Owned by billionaire Patrick Drahi, Altice
already has a presence in the Portuguese
market through telecoms operator Oni,
which it acquired in June 2013, and cableco
Cabovisao, which it bought in February 2012.
Local media reports have also named
UK-basedVodafone Group and Spanish
Telefonica among the potential bidders.
But Altice is reportedly looking to enter
into exclusive talks with Oi over PT and
the holding is rumoured to have contacted
the groups Brazilian and Portuguese
shareholders to discuss issues including price
and proposed deal structures.
In a statement on 13 October, the
Brazilian telco Oi said that there were
various parties, including Altice, that
have expressed an interest in the companys
Portuguese operations.
The telco noted the potential bidders have
contacted its adviser, BTG Banco Pactual, to
request information about PT to potentially
acquire the target or part of its non-strategic
assets. In an earlier securities ling, Oi had
responded to market speculation saying
that it had not taken any decision regarding
the sale of PT, which it agreed to acquire in
October 2013, and had not received an offer
for the asset.
It, however, added it was still continuing
with its strategy to dispose of non-core assets
including Africatel, for which it had not
received a bid either.
Ois interim CEO Bayard Gontijo later
added that Oi was not looking to unravel its
merger with PT, although it could sell some
Portuguese assets.
Deal talks between Altice and PT would
need to establish howmuch debt the
Portuguese company would retain. In early
September, Oi and PT revised the terms of
their merger, following Riofortes default on
a 847m (US$1.1bn) debt payment to the
Portuguese operator which forced it to reduce
its stake in the combined entity from 37.4%
to 25.6%.
Ois CFO Gontijo was named interim CEO
in early October, following the resignation
of Zeinal Bava.
Bava, who was appointed as head of the
Brazil-based combined Oi-PT business
in June 2013, has been instrumental in
facilitating the merger, further fuelling
speculation that the combination could be
undone in the wake of his departure.
Rumours of Altices interest in PT rst
emerged in early August when CEO Dexter
Goei said the company would continue to
monitor the situation in Portugal.
There continues to be several steps that
this can play out, particularly as the Brazilian
consolidation play is just starting to get
rolling, he noted.
Altice is currently seeking regulatory
approval for the merger between its French
cableco Numericable and local mobile
operator SFR, which it agreed to acquire from
Vivendi in April.
Besides Portugal and France, Altice
owns a portfolio of telecoms assets in
Belgium, French overseas territories, Israel,
Luxembourg and Switzerland.
8 www.telecomfinance.com
western europe
Altices owner Patrick Drahi
Altice targets
Portugal Telecom
PORTUGAL
Telco reportedly seeks to enter exclusive talks with Oi
Altice already has
a presence in the
Portuguese market
through telecoms
operator Oni and
cableco Cabovisao
-
www.telecomfinance.com 9
western europe
The CEO of Telecom Italia (TI), Marco Patuano,
has reportedly received a mandate from the
management board to negotiate the acquisition of
infrastructure fund F2is stake in local dark bre
operatorMetroweb.
Patuano was given the mandate at the last board
meeting on 26 September, according to a newswire
report citing a source close to the matter.
However, two of Metrowebs shareholders
Fastweb and government-owned lender Cassa
Depositi e Prestiti (CDP) were reported as saying
they were not aware of any plans to sell F2is stake
to TI.
In March, media reports had already suggested
that the Italian incumbent was planning to invest
300m for a less than 50% stake in Metroweb to
avoid antitrust scrutiny. TI was reportedly looking
to buy the stake from F2i, which holds an indirect
46.8% interest in the bre optic provider.
Most of the remaining shares are split between
CDP, with an indirect 32.2% stake through Fondo
Strategico Italiano (FSI), and Fastweb which
holds 10.6%.
In September, CDP CEO Giovanni Gorno
Tempini reportedly said Metroweb had the nancial
resources to invest in bre projects and was
welcoming approaches from potential partners.
A deal with Metroweb would make strategic
sense for TI, as the company is striving to reduce
its more than 28bn net debt to upgrade its
broadband network.
In 2011, F2i and Intesa San Paolo bank fully
acquired Metroweb fromUK investment fund
Stirling Square Capital Partners and multi-utility
company A2A for 436m.
TI CEOmandated
for Metroweb deal
ITALY
Speculation over the future of Italian triple-play operator Fastweb
has reignited following a report which suggests that its parent,
Swisscom, has hired a bank to explore a sale of the unit.
The Swiss incumbent is working withUBS, previously an adviser
to long-term Fastweb suitor Vodafone, to see if a deal can be done
with the British telco, sources familiar with the situation told a
newswire in early October.
Vodafone is reportedly not currently in talks with Swisscom but
retains an interest in acquiring the Italian telco.
Fastweb CEO Alberto Calcagno was later quoted as saying that
the sale rumours were mere gossip,while Aldo Bisio, the head
ofVodafone Italy reportedly said that present conditions were
not favourable for a deal to buy the Italian broadband company.
Italy isVodafones largest Europeanmarket where it is yet to offer
xed-line services and has therefore been linked to a Fastweb
acquisition since it decided to focus on adding xed-line assets to
its mobile operations.
Swisscom,which is majority-owned by the Swiss Confederation,
acquired Fastweb in 2007 for an enterprise value in the region
of 4.2bn.The business could now be worth asmuch as 5bn,
according to the report.Fastweb has the second-largest network
in Italy after Telecom Italia.The Italian incumbent has itself
been linked to an acquisition of smaller local B2B bre operator
Metroweb, in which Fastweb has a 10% stake (see story above).
However, the asset is not of interest toVodafone as it would not
amount to a game-changing acquisition, the report said citing
one of the people.Vodafone has acquired a number of xed-line
operators over recent years in the larger Europeanmarkets it
operates in: in 2012, it bought British enterprise player Cable &
WirelessWorldwide for US$1.67bn; in 2013 it sealed its US$10.5bn
takeover of Kabel Deutschland; and this year it bought Spanish
cableco Ono for US$10bn.
Vodafone has also hinted at a transformationalM&A deal in
the longer term. In September, its CEOVittorio Colao was cited as
saying his company could explore a purchase of pan-European
cable giant Liberty Global for the right price (see story on page 15).
ITALY
Fastweb sale rumours return
Telecom Italia CEO Marco Patuano
-
western europe
10 www.telecomfinance.com
EC green-lights
Liberty-Ziggo deal
Liberty Globals takeover of Dutch
cableco Ziggo has been cleared by the
European Commission following a Phase II
investigation.
To obtain approval for the acquisition, the
pan-European cable giant offered remedies
to address certain competition concerns,
including the divestment of its Film1
business in the Netherlands.
Liberty Global also pledged to terminate
clauses currently in carriage agreements
with TV broadcasters that restrict the ability
of broadcasters to offer their channels and
their content through OTT services, and
committed not to end those agreements
for eight years.
Furthermore, in order to ensure that
commitment cannot be undermined, Liberty
Global has committed to maintain adequate
interconnection capacity through at least
three un-congested routes into its internet
network in the country, at least one of which
with a large transit provider.
Joaquin Almunia, the Commissions vice
president in charge of competition policy,
commented: The commitments offered by
Liberty Global ensure that the acquisition
of Ziggo will not be detrimental to Dutch
consumers, who will continue to enjoy the
benets of innovative services and choice for
watching audio visual content.
Mike Fries, CEO of Liberty Global, said:
We are excited to create a national cable
champion, and look forward to restarting our
share buyback programme very soon.
Liberty Global was forced to prolong its
public offer for Ziggo shares to 4 November
when the European Commission extended
its review of the purchase.
Liberty struck a deal to buy the Dutch
cableco for 4.9bn (US$6.6bn) earlier this
year and merge it with its own local cable
assets,UPCNetherlands.
In June Liberty launched its 35.74 per
share offer, a 47% premium over Ziggos
closing share price on 27 March. The
antitrust authority had set a provisional
deadline of 3 November to nish its review of
the transaction.
The tie-up brings together the
Netherlands two largest cable operators,
although the companys footprints do not
overlap.
Frenchmedia group Vivendi is reportedly looking to acquire
a stake in Italy-basedMediasets pay-TV unit from Spains
Telefonica to expand its footprint in the country.
The company is interested in buying 11% ofMediaset
Premium, according to a newswire report.
As part of a deal agreed in September to sell its Brazilian
broadband business GVT toTelefonica,Vivendi will receive
a 5.7% stake in Telecom Italia (TI) which represents 8.3%
of the Italian incumbents voting capital.
Such a stake could reportedly help it forge alliances
to distribute its contentmore widely in Italy.
Telefonicamight be keen to sell its Mediaset Premium
stake,which it acquired in July for approximately 100m,
as it is looking to fully exit Italy, an analyst was quoted
as saying.
Telefonica reportedly has the right to sell back the interest
within sixmonths from acquiring it, if the Italianmedia group
nds another partner for the business.
Should a deal withMediaset go through,Vivendi would be
going back to a familiar market.
In 1997,Vivendi-owned Canal+ bought Italian pay-TV provider
Telepiu. It was thenmerged with News Corps pay-TV division
Stream in 2001 and sold to News Corp a year later, in a bid to
reduce the parents debt.
Vivendi eyes Mediaset Premium stake
ITALY
Quad-play operatorNos, which was
created from the merger of Zon and
Optimus, has sealed a 175m (US$225m)
bond issued to renance existing debt.
BNP Paribas, ING and Societe Generale
acted as mandated lead arrangers and
bookrunners for the six-year private
offering. Caixabankwas lead arranger.
The notes mature in September 2020.
They carry a oating interest rate with a
spread of 215 bps, and the rst coupon
will be due in March 2015.
The new facility will replace an existing
100m bond originally placed by Zon and
Optimus parent Sonaecom in September
2011. It was arranged at the time by BNP
Paribas,WestLB and ING and was due to
mature in March 2015.
The 2020 notes will also renance a
25m bond issued in November 2010 in
a private placement led by Banco BPI,
Banco Santander Totta and BNP Paribas.
Nos said the renancing enables it to
further diversify sources of debt, while
increasing the average maturity of its net
nancial debt to 2.5 years and further
reducing the all-in average cost of debt.
Cableco Zon and wireless operator
Optimus agreed to merge in January
last year to create Portugals second-
biggest telco behind incumbent
Portugal Telecom.
After a lengthy antitrust review,
the combination received regulatory
approval and the deal completed in
late August 2013.
Nos issues
175m
bond
PORTUGAL
The commitments
offered by Liberty
Global ensure
the acquisition of
Ziggo will not be
detrimental to Dutch
consumers, who will
continue to enjoy the
benets of innovative
services and choice
for watching audio
visual content
NETHERLANDS
-
western europe
www.telecomfinance.com 11
Denmarks telco TDC has agreed to acquire
Norways second-largest cableco Get from
its private equity owners for NKr13.8bn
(US$2.16bn), in a deal it says will create
Scandinavias largest cable TV company
in terms of revenue.
TDC will nance the purchase from
Goldman Sachs GS Capital Partners
andQuadrangle Capital Partners by
issuing debt.
The Copenhagen-based operator will
simultaneously adjust its dividend payout
ratio to about 60% of its equity free cash
ow. This reduces the dividend payout for
2014 to DKr2.50 per share from a previously-
anticipated DKr3.70 per share.
In early September, it was reported that
bankers were working on debt nancing
packages for potential buyers of around 1bn
(US$1.3bn), with senior leveraged loans,
second lien loans and high-yield bonds all
considered as options.
JP Morgan acted as TDCs nancial adviser
on the transaction, while Kromann Reumert
was its legal adviser. The Danish telco expects
the deal, which is subject to the approval of
Norwegian competition authorities, to close
in Q4 this year.
Gets owners hired Goldman Sachs and
Deutsche Bank in May to examine an IPO,
but later opted for a sale process. The
acquisition will see TDCs cable business
increase from 1.2 million to 1.7 million
connected households and produce revenues
of DKr7bn (US$1.2bn).
TDC CEO Carsten Dilling described the
deal as the companys most signicant
investment in many years, saying it
marks its transformation into a leading
Scandinavian provider of TV, home
entertainment and high-speed broadband
services using the cable platform.
It is also a strategic move into the
consumer market in Norway within an
industry we know very well from having
run our YouSee cable business in Denmark
successfully for years.
Dilling added that TDC Norway, which
owns a bre-based transmission network
and focuses on large business customers,
and Get, which targets individuals and
small and medium-sized businesses, are
a good match from both a commercial
and a technical perspective.
Gets current CEO Gunnar Evensen, who
has held the post since 2000, will lead the
combined organisation in Norway.
Get had a turnover of NKr2.4bn
(US$374.8m) in 2013 and EBITDA of
NKr1.1bn (US$171.79m), TDC said. It owns
and operates a hybrid bre and coax network
in urban areas, passing about 700,000
households and businesses, 500,000 of which
are connected customers.
GS Capital Partners and Quadrangle
bought Get for 725m in 2007. In 2012, they
considered putting the business up for sale
and a 1bn-plus price tag was mooted.
They later decided to reorganise Gets
debt and hold on to the cableco.
Telenor is the largest supplier of mobile
services, pay-TV and xed broadband
in Norway.
TDC buys Get for US$2.2bn
NORWAY
Danish telco snaps up cableco from private investors
TDC CEO Carsten Dilling
Norways third largest carrierTele2 has inked
an agreementwith IceCommunication,
owned by new entrant Access Industries, to
gain access to part of its 900MHz spectrum
until April 2015.
Under the deal, Icewill be able to buy parts
ofTele2smobile network infrastructure if the
countrys competition authority approves the
sale ofTele2 to larger rivalTeliaSonera.
The companies did not disclose the nancial
terms of the agreement.
TeliaSonera, which is Norways second largest
player, agreed to buyTele2 in July for SKr5.1bn
(US$744m) after the target lost out in last
Decembers 4G auction.
In early September, the competition
authority set an 11November deadline to
assess whether themerger would result in
reduced competition and harm consumers.
Regulatory concerns over the deal, which
would combine two of the countrys three
establishedmobile operators, prompted the
Norwegian Post andTelecoms Authority (NPT)
to scrap the January 2015 date it had set to
auction 1,800MHz spectrum.
The infrastructure deal will enable Ice,
a subsidiary of American billionaire Len
Blavatniks Access Industries, to expand its
network coverage, thus potentially becoming a
viable third player.
This [agreement] has a very positive impact
on competition in theNorwegianmarket, said
TeliaSoneraNorway CEOAugust Baumann in
a statement.
It helps tomeet the political target
according towhich there should be three
mobile networks in the country, while it
also guarantees network access toTele2s
customers until spring 2015, when the
trafcwill be switched over to our network,
he added.
TeliaSonera, which committed itself to 98%
population coverage for 4G by the end of 2016
if themerger withTele2 goes ahead, said it has
not taken part in the negotiations between Ice
andTele2.
BuyingTele2Norwaywould boost the
companysmarket share from23% to around
40%with 2.7million subscribers, although it
would still lag behind the countrys incumbent,
Telenor, which has 3.2million customers.
InDecember 2013, Norway secured
NKr1.79bn (US$291m) by selling frequencies to
TeliaSonera,Telenor and Ice.
After failing to secure spectrum,Tele2
hired ABG Sundal Collier inMarch to identify
strategic options to stay competitive in the
Norwegianmarket.
Tele2 strikes sharing deal with Ice
NORWAY
-
western europe
12 www.telecomfinance.com
Telefonica prices 800m
eurobond
Incumbent Telefonica has priced a 800m
(US$1.01bn) bond at par.
Launched under theMadrid-based
companys EMTN programme, the notes
carry a coupon of 2.932%, have a reoffer
price of 100% andmature in October 2029.
Leadmanagers for the issue were BBVA,
Credit Agricole,Caixabank,Mitsubishi UFJ,
RBS and Santander.
Moodys rated the bond Baaa2,while
Standard & Poors and Fitch gave a BBB. In
mid-September,Telefonica issued 1.5bn
worth of convertible notes to help nance
its 8.6bn takeover of Germanmobile
operator E-Plus.
Also in September,Telefonica agreed a
7.24bn cash-and-stock deal to purchase
Vivendis Brazilian broadband unit GVT.
The telco will fund the cash component
of the deal with a capital increase at its
Brazilianmobile unitVivo.
It will subscribe to this to keep its current
74% stake, funding this, in turn,with a
capital increase at group level.
SPAIN
Greeces telecoms regulator EETT has
said local operators paid a total of 381m
(US$482m) for spectrum licences in the
auction of 800 MHz and 2.6 GHz frequencies.
Incumbent Cosmote, British-backed
Vodafone Greece andWindHellas
acquired all the available 15-year licences.
Cosmote spent 135m on two paired blocks
in the 800 MHz band, six paired blocks in the
2.6 GHz band, and a further two single blocks
in the 2.6 GHz. Vodafone bought the same
spread of licences for 124.5m. Meanwhile,
Wind purchased two paired blocks of 800
MHz spectrum and four paired blocks in the
2.6 GHz band for 122m. EETT started on
working on the digital dividend auction back
in May 2013 following a renewed bailout plan
with the European Union and International
Monetary Fund, which prescribed a
switchover from analogue to digital TV to
free up airwaves.
The recession-hit countrys telecoms
market is moving closer toward consolidation,
which local analysts say the sector dearly
needs. Vodafone andWind held talks about a
merger in 2012, but Vodafone pulled out of the
process. However, analysts believe a deal may
still happen in the future as the companies
have become closer since 2012.
4G auction
raises 381m
GREECE
UK
EuNetworks inks
70m funding
Pan-European bre operator EuNetworks
has secured new debt to develop its network
and repay existing debt.
The bandwidth infrastructure provider has
entered into a 70m (US$88m) multi-currency
credit facility with Barclays and RBC Capital
Markets, and the loan can be expanded to
100m (US$126m) if growth opportunities
present themselves.
EuNetworks did not disclose the terms of
the loan beyond saying it was happy with the
interest rate, total leverage incurrence test,
and the delayed draw feature.
Brady Rafuse, CEO of EuNetworks, said:
This funding enables us to further meet the
growing bandwidth needs of existing and
new customers across Europe.
Some of proceeds of the new loan will
be used to completely repay existing debt
facilities that were entered into in May 2013.
EuNetworks operates bre and data centres
across Europe and is headquartered in
London, although the business has been listed
on the Singapore Stock Exchange since 2004
and is registered on the island.
Sol Trujillo, the former CEO of Australian
telco Telstra, is reportedly looking to raise
7.5bn (US$9.6bn) to acquire a stake in Italian
incumbentTelecom Italia(TI).
Trujillo, who has not yet approached TI,
has discussed the potential bid with nancial
advisers, according to a Bloomberg report,
which cites people familiar with the matter.
A number of Qatar and Abu Dhabi-based
sovereign wealth funds have reportedly shown
interest in the project.
A 7.5bn offer would represent just under
half of the incumbents market capitalisation,
which currently stands at 17.55bn.
Senior Italian ofcials, including junior
minister for economic development Antonello
Giacomelli, reportedly held condential
meetings over the project.
A later, separate, report quoted Giacomelli
as saying he was not aware of Trujillos plans,
adding that the Italian government would
use its special powers to defend the company
if required.
Trujillo started his career at AT&T in 1984.
He was later appointed CEO of USWest and
also headed French incumbent Orange for
a year. In 2005, he became CEO of Melbourne-
based Telstra.
TI is trying to ofoad some of its assets to
reduce its net debt, which stood at 28.8bn, as
of 30 June 2014.
In recent years, TI has attracted interest
from a number of overseas investors,
including Hong Kong billionaire Li Ka-shing,
AT&T, Carlos Slims America Movil and
Egyptian tycoon Naguib Sawiris, who saw its
US$3.8bn offer to buy a stake in TI rejected
in 2012.
Sawiris was recently quoted as saying that
he would invest in TI as long as the company
kept its stake in Brazilian mobile operator TIM
Brasil. He reportedly added that he would be
willing to take part in a capital increase but
would not buy shares on the market.
However, during an event in Capri in early
October, TI CEOMarco Patuano reportedly
said the company was not studying any
capital increase, including issues dedicated to
new investors.
No tower sale in 2014
Patuano also pointed out that the company
will not close the sale of its tower portfolio
by the end of this year, as initially expected,
adding that it was currently evaluating
two options.
At the end of July, local media reports
suggested that TI was looking to launch the
sale process for its 8,000 mobile telecoms
towers in September.
Earlier reports had said that instead of
selling the towers outright, TI management
was looking to spin off the tower assets, worth
an estimated 1bn (US$1.34bn), before listing
them on the stock exchange.
Italian towerco EI Towers and infrastructure
fund F2i as well as Spains Abertis and
American Tower have been reported as
potential bidders.
Proceeds from the tower sale are expected
to be used to upgrade its domestic networks.
Former Telstra
CEOmulls TI offer
ITALY
-
A Phones 4u store in the UK remained closed after the company went into administration
western europe
www.telecomfinance.com 13
Phones 4u goes bust
Phones 4us administrator PwC has
agreed to sell almost 200 of the stricken
resellers shops to network operators EE and
Vodafone for about 15m (US$25m).
Phones 4u went into administration on 15
September after EE andVodafone decided not
to renew their contracts with the company.
EE will buy 58 stores for approximately
2.5m while Vodafone will acquire 140 Phones
4u outlets for 12.4m.
Both deals are subject to the approval
of the UK courts, and the administrator
said it hopes both disposals can be ratied
in one hearing. The remaining 350
standalone stores will be closed. A group
of investors, which hold some of
Phones 4us 430m (US$702m) senior secured
notes, had proposed to take a substantial
write-down on their debt to reorganise
Phones 4u so that it can meet the lower
commercial terms EE andVodafone
had proposed.
PwC subsequently dashed bondholders
hopes for a debt-for-equity swap, saying it
was not viable.
Phones 4us private equity-owner
BC Partners has already recouped its
investment in the retailer. In September
2013, Phones 4u issued 200m (US$327m)
PIK toggle notes to pay BC Partners a one-off
dividend, which was topped up with a further
25m in cash. This paid off all of BC Partners
initial equity used to buy Phones 4u and the
rm has made a 30% prot on its investment.
UK
Rumours of a sale of Sunrise have resurfaced after a report
suggested the Swiss mobile operators private equity owner
CVC Capital Partners had resumed the exit process it suspended
at the end of 2013.
However, a source close to the situation played down the
newswire report and implied that the suggestion of a
specic process was incorrect, although the operator would
be sold eventually.
CVC bought Sunrise in 2010 fromDanish telcoTDC for
US$3.2bn and a potential sale price for the business of US$5.2bn
has been estimated by themedia, based on the 8x EBITDA
multiple its larger rival Swisscom trades at. In its most recent
results, Sunrise reported US$1bn in revenue for the rst half of
the year and recorded EBITDA of US$168m for Q2,which the telco
said was a 5.7% increase on the same period in 2013.
Sunrise is the second-largest mobile operator in Switzerland.
Earlier this year, it was linked to amerger with rival Orange,
which would take the countrys mobilemarket down from three
operators to two.
A Swiss publication reported that a tie-up could be possible
because themarket environment had improved since cableco UPC
Cablecom launched anMVNO earlier this year.
Sunrise is headquartered in Zurich and also offers xed-line
telephone, broadband and digital TV services.
Sunrise sale talks played down
SWITZERLAND
US-based payments technology giant Visa
has hired JP Morgan to review options for its
5.5% stake in UKmobile payment provider
Monitise.
Visa, which in 2009 secured a 14.4% interest
in Monitise, has over time reduced its stake in
the company.
The move is consistent with its strategy to
seed emerging players before tapering that
inuence as the partner company grows, Visa
said in a statement.
Consistent withVisas increased
investment in our in-house capabilities,
and the substantial growth in Monitise, Visa
is considering its options with regard to its
Monitise stake, commentedVisa EVP of
corporate strategy Bill Sheedy.
Shortly after the announcement, shares
in Monitise fell about 30% to 0.29. As
TelecomFinance went to press, Monetise had
a market cap of 584m.
According to Mark Palmer from BTIG
Research, the evaporation of about a quarter
of Monitises market capitalisation was out
of proportion to its likely impact on the
companys prospects, including its likelihood
to eventually be taken over at a signicantly
higher share price by IBM or another suitor
seeking to enhance its role in the global
mobile money space.
Visa andMonitise also inked a commercial
agreement in 2009, which runs until 2016, for
the provision of mobile platform development
services.
In a statement, Monitise said it will
continue its alliance withVisa and reiterates
it guidance for this nancial year, its
expectation to be EBITDA protable in FY
2016 and its longer-term guidance for 2018.
Visa considers
exit from
Monitise
UK
-
western europe
14 www.telecomfinance.com
MVNO TPO plans
London listing
UK-based MVNO The Peoples Operator
(TPO) is looking to launch an IPO on Londons
junior market AIM in November.
Proceeds from the offering will be used
to grow its online community to gain more
customers, as well as build the infrastructure
required to expand into identied target
countries, particularly the US, according to a
securities ling.
TPO, which is being advised by FinnCap,
declined to disclose the exact size of the
offering or the pricing, although it conrmed
that it would sell a minority stake.
The London-based company, which is
backed byWikipedia founder JimmyWales,
donates 10% of each users bill to a charity
of their choosing. Additionally, 25% of
TPOs prots go to charity through the TPO
Foundation.
The company claims that its business
model is still protable as it relies less on
traditional customer acquisition models,
compared to other market players. Instead,
it looks to secure new customers through a
viral marketing system based on an online
global community, to be developed byWales
who was appointed as TPO vice chairman in
January and also serves as director of strategy
and digital community.
Founded in November 2012, the London-
based MVNO, which is reportedly valued
at about 100m, has more than 10,000 UK
subscribers and provides services using
EEs network.
Commenting on the IPO announcement,
TPO chairman Andrew Rosenfeld said: Our
operating deal with Sprint Corporation along
with Jimmys plans for viral online growth
will, I believe, have a dramatic impact on
revenues and thereby deliver signicant
returns to shareholders.
TPO has recently signed an operating
agreement with US operator Sprint Corp
and aims to launch in the country 2015.
According to the ling, the MVNO
intends to operate only in those countries
that offer competitive wholesale mobile
network prices.
In January,Wales said the company
would be looking to ink MVNO deals and
was seeking partners and investors across
the globe.
UK
Daisy offer
deadline pushed
back again
UK
AIM-listedDaisy Group has again extended
the deadline for a consortium fronted by its
CEO, Matthew Riley, to buy it out.
Riley, asset manager Toscafund and
private equity rm Penta now have until 20
October to formalise their 1.90 (US$3.11)
per share offerto acquire the UK telecoms
and internet provider.
The consortium asked for the latest
extension to consider and nalise certain
aspects of its proposal.
The buyers made a preliminary approach
in late July that valued Daisy at 507m
(US$817m). Under UK takeover law, the
syndicate initially had until 10 September
to make a binding offer but extended the
deadline to 22 September, and then to 6
October.
Riley, who has led Daisy since founding it
in 1991, already has a stake of roughly 23%,
while Toscafund holds about 28.5%.
Penta sold its UK B2B telco SpiriTel to
Daisy back in 2010 for 27m (US$45m).
Liberum is Daisys nominated adviser,
and is also advising on the UK takeover
code.Oakley Capital is its nancial adviser.
Toscafund listed JP Morgan for enquiries.
Daisys shares are currently trading
at 1.83 and the telco has a market
capitalisation of 489m.
Liberty completes All3Media deal
JohnMalones Europe-focused cable
giant Liberty Global and USmedia and
entertainment companyDiscovery
Communications have completed
their joint acquisition of UK-based
TV production and distribution house
All3Media.
Liberty and Discovery agreed inMay
to create a 50:50 joint venture to buy
All3Media from its founders and the
Permira funds.
The deal, which has obtained
regulatory clearance, values All3Media
at about 550m (US$930m).
Commenting on the closure in a
statement, Liberty CEOMike Fries
described All3Media,which produces
content for some of its biggest markets
in Europe, including the UK,Germany
and the Netherlands, as a natural t for
the company and its content strategy.
All3Media comprises 19 production and
distribution companies from across the
UK, Europe,New Zealand and US.
InMay, the company was recapitalised
with what Liberty and Discovery have
described as a structure that provides
for a solid nancial foundation as the
joint venture takes control and All3
Media enters the next phase of growth.
JPMorgan acted as nancial adviser to
Liberty and Discovery on the deal.
The acquisition forms part of Libertys
expansion into EuropeanTVmarkets,
which has also seen it acquire the
UKsVirginMedia and UK commercial
broadcaster ITV.
Meanwhile, All3Media CEO Farah
Ramzan Golant has stepped down
from the role.
A global search for a successor has
begun. COO JaneTurton has been
promoted tomanaging director and will
lead All3Media in the transition period.
UK
Liberty Global chairman John Malone
-
western europe
CEO: Vodafonemay
look at Liberty bid
Vodafone could consider a
transformational M&A deal in the longer
term and would explore a takeover of cable
giant Liberty Global for the right price, CEO
Vittorio Colao has been cited as saying.
Speaking at a September investor
conference in NewYork, Colao, pictured,
reportedly said efforts to invest inVodafones
networks and consolidation within the
telecoms sector would better enable the
company to make deals in the longer term.
Following his presentation, the CEO was
reported to have said that JohnMalones
Europe-focused cableco may be the right t
for Vodafone, price dependant.
UK-basedVodafone has made a strategic
decision to look for convergence plays in
Europeanmarkets where it already offers
mobile services. The sale of its stake in the US
VerizonWireless for US$130bn last year has
freed up
cash to both develop its networks and
make acquisitions.
Vodafone has since acquired Germanys
largest cableco Kabel Deutschland for 7.7bn,
beating Liberty to the asset, as well as Spanish
cableco Ono for 7.2bn and Greek broadband
and xed-line operator Hellas Online for
72.7m. And this July, the company made
a joint bid with Greek telcoWind Hellas for
Athens-listed alternative xed-line operator
Forthnet.
Meanwhile, there has been considerable
speculation that Vodafone could combine
with a large player such as Liberty, with which
it has competed for cable assets in Europe, or
US telecoms giant AT&T.
An industry banker, however, commented
that Vodafone may be unwilling to be bought
by AT&T. Acquiring Liberty would allow
Vodafone to become a very large group,
therefore deterring AT&T frommaking a move
for the British telco.
Separately, Colao was quoted as saying
at the Goldman Sachs Communacopia
conference in September that UK rival BT
is expected to pursue a similar strategy to
Vodafone.
BT may also discount mobile services
to help push its core broadband offerings.
Colao reportedly contended that such a move
would likely promptVodafone and other
local mobile operators to discount their xed
broadband services.
Colao added he is optimistic that the
new European Commissioners will
address the low return on investments in
the telecoms sector, arguing that mergers
should be approved without remedies
granting other operators wholesale access
to networks.
Gunther Oettinger and Andrus Ansip
were named as the successors to Neelie Kroes
in September as commissioners for the
digital agenda.
UK
Gigaclear gears up for IPO
British rural broadband providerGigaclear
is set to list on AIM, Londons junior stock
market, to expand its network coverage
across the country.
The company said new ordinary shares
will be placed with institutional investors. It
also plans to invite qualifying customers and
existing shareholders to invest in the shares.
Dealings in the shares are expected to
start in October.The company has not
revealed howmuch it plans to raise from the
listing, but according to a local report citing
people familiar with the plans, Gigaclear is
targeting about 20m (US$32.5m).
In themedium term, the operator plans to
invest 180m, including the IPO proceeds, to
build networks serving up to 200,000 homes
in underserved areas across the UK.
Oriel Securities is acting as nominated
adviser and the companys sole broker for
the IPOwhile Cameron Barney serves as
nancial adviser.
Oriel declined to disclose the size of the
stake that will be oated and dismissed any
possibilities of growing viaM&A.
Founded in 2010 byMatthewHare,
the companys current CEO,Gigaclear
operates nine bre-to-the-premises
networks in rural areas.
Another ve are under construction and
are due to be completed by Q4 2014.
UK
www.telecomfinance.com 15
Vodafone CEO Vittorio Colao
-
16 www.telecomfinance.com
Guy Ferneyhough: Can you walk us through
the Jazztel acquisition and what you see will
be the benets of owning the Spanish xed-
line operator?
Gervais Pellissier:We think the European
market is clearly now in a phase of in-country
consolidation, in two dimensions. One is the
reduction of the number of mobile players,
like what weve seen in Ireland, Germany,
and maybe in France.
And the other trigger is convergence
between xed andmobile players, or
consolidation amongst xed players. In Spain,
it is not mobile consolidation today: it is
xed-to-mobile, or the reinforcement of xed
operators, as is the case for Orange, which
was already slightly bigger than Jazztel in the
xed business.
GF:What about the three cable operators
in the north of Spain are they of any
interest to you?
GP: I think to us or toVodafone they are quite
small but my feeling is that because these
are cable operators, Vodafone is the more
natural acquirer.
In terms of technology, our basic
technology is DSL and FTTH and we just
rent cable lines fromVodafone.
We wont manage a cable network so I am
not sure we will look at the cable guys in the
north of Spain.
Wemight look at the potential because we
have a long-term relationship with the Basque
one, Euskaltel, but Im not sure it is of great
interest for Orange Spain.
GF:Moving on tomobile, do you thinkYoigo
is an attractive asset?
GP: Yoigo is an asset which has customers,
spectrum, and some infrastructure. Now,
how attractive is that for others? I think
spectrum and customers are always attractive
to anybody, but lets be clear, everybody has
enough infrastructure. Today the question is
even if Yoigo is attractive, what is the price of
that attraction?
If we succeed in acquiring Jazztel, the
view on the pricing of Yoigo might be
slightly different because Yoigo has no xed
infrastructure and depends on Telefonica to
penetrate the xed market.
GF: And as far as four-to-three consolidation
in Spain goes,would you anticipate that
being an issue?
GP:We think that today it might not be such
a big issue, although that is a little more
complex on the regulatory basis than xed-
mobile consolidation.
Curiously, there is always more debate
by regulators on mobile consolidation and
MVNOs, whereas there is too little debate
on cable.We think there is too much focus
on mobile today andmaybe not enough
on cable.
GF: What is your view onTelefonicas deal
with Canal+ in Spain?
GP: The deal is done. It has to be approved
by the regulator, but we have nothing against
that deal.We think the question for other
xed operators especially when they are
alternative is to ensure that they have equal
access to the content.
This is what I think bothVodafone and
ourselves will try to secure with the regulators
so that Telefonica is not creating exclusive
bundles that cannot be replicated by others.
But we have nothing against the fact that
Telefonica can make money in content and
manage content operations
In France, when we decided to invest
into content, we were forbidden by the
antitrust regulator to dedicate our content
exclusively to our customers we had to
open it up.
We think that in terms of nancial ow, it
should remain at arms length, and not create
a pricing differentiation
If you take France again, one of the claims
we have against the merger between SFR and
Numericable is the inequality of access to
content given to Numericable compared to
bre or DSL players.
Numericable has a specic regime to access
content which we cannot replicate today.
GF: On France, how do you see themarket
playing out in terms of consolidation?
GP:We think today that full consolidation, by
which I mean a merger between operators,
Q&A
We need the positive impact
of consolidation in France to
aidmarket repair
Guy Ferneyhough
Senior Reporter,
TelecomFinance
In September,Orange CEO delegateGervais Pellissier also became the companys
head of European operations (excluding France). A fewweeks later, the French
incumbentmade an offer for Spanish fixed-line operator Jazztel. In his first interview
since taking on his new responsibilities, Pellissier talks to TelecomFinance about
convergence, consolidation and the prospects of taking EE public
Source:FranoisMarchalforOrange
-
is not on the short-term agenda because
everybody has moved on to something else.
Mr Niel [owner of Iliad] [was] chasing after a
very big prey in America [T-Mobile US]; we
have been moving in Spain; Numericable is
at the end of the process of buying SFR; and
Bouygues has prepared its restructuring plan
to become a leaner company, which means
that everybody has different plans for the
short term.
However, consolidation remains a question
and will be brought back to the table.
How quickly? I dont know.What we think
is that before having a merger between
operators, we might have more discussions
to share infrastructure.
That is one way to get more value
creation in the short term: for the different
operators to work together on how to
share infrastructure and how to share the
cost of coverage.
We will see whether the competition
authority nally approves the network
sharing agreement between Bouygues and
SFR, but I think there will be discussions
between everybody to cover the rural areas,
and to deploy faster 4G in some areas.
We are likely to have these small pieces of
agreement that might not be the big deal
we may see in the headlines, but which is a
way to capture some of the synergies that you
would be able to capture in a big merger.
GF: And do you think Orange could be part
of a consolidation deal?
GP: In terms of network consolidation, the
answer is yes. Because we have the biggest
network, we have the biggest platform, and
we are open to discussions.
In terms of a merger itself, what we clearly
stated in July was that we would no longer be
the primemover in a big move.
Why? Because we are the only one that
cannot buy 100% of somebody else without
being obliged to sell a lot of pieces.
Lets be clear, we have not seen the
number one be the consolidator in any
other country.
This is why we have said if some of our
competitors want to do something together
then we are ready to help if we are requested
to do something, but we will no longer
undertake the rst step.
We need the positive impact of
consolidation in France to aid market repair,
but we do not need to be bigger
We have 45%market share in broadband,
we are nearly 40% in mobile, and we know
our room for manoeuvre to go above those
percentages is very limited.
GF: In the UK,what is your position on EE?
A fewmonths back, you said that after the
summer you would look at an IPO again
GP: The position there is very simple. Two
things: One is a question of timing.We have
agreed with our German colleagues to look
again at a ling once they have made their
decision on the US as to whether they stay or
sell, which I think they may decide before the
end of the year.
Regarding EE, I think the question of
the IPO is also linked with xed-mobile
convergence in the UK. If we think xed-
mobile convergence is not something that
needs to be done rapidly then wemight
reopen the IPO project. If, on the other
hand, we think xed-mobile convergence
will really start next year, then wemight rst
work on partnership co-operations, maybe
consolidation I do not know rather than
trying to prepare an IPO.
This is a real strategic question because
neither Deutsche Telekom nor Orange is in a
hurry to divest and get cash from EE.
In the end we will be happy to monetise
some of our shares in EE, but in the meantime
we would prefer to keep the value of the
asset and strengthen its value than to IPO
and then see another big, big convergent
operator created.
GF: Speaking of xed-mobile convergence
in the UK, do you see anything happening
there?
GP: Today, not yet. For B2B it has been a
necessity. BT has signed anMVNO
agreement with us, rst to provide B2B
convergent services.
When you are talking to small, medium-
sized and big companies you need to offer
the whole spectrum of telecoms services,
including xed-line, bre andmobile.
This is the reason whyVodafone has bought
Cable &WirelessWorldwide to have an
enterprise offer that will be able to compete
against BT.
So we think that convergence is really there
in the B2B eld.
Regarding consumer xed-mobile
convergence in the UK, an evolution is
coming, but it is not coming easily as this
means a change in the distribution.
The fact that Phones 4u is under
administration is not only a sign of
something happening specically to
Phones 4u, but also a sign that the
distribution is changing in the UK.
I think independent distributors like
Phones 4u and CarphoneWarehouse were
not a facilitator of convergence.
The ability of a third party to sell a
combined bundle between xed andmobile
is lower than the ability of the operator
himself, because of technical features and
condence of the customer.
The second point is we need to see under
which form BT is proposing quadruple play
they should do that at the beginning of
the year.
And I think those two points will change
the perspective and then we could start to
see convergence.
In terms of customer experience on data,
convergence becomes key because you
cannot have a good customer experience
through the mobile network only.
You needWi-Fi and you need the mobile
network, so you need convergence.
GF:Weve talked about xed-line in Spain
and the UK, touched on France what about
other Europeanmarkets?
GP:We are working on that in Poland, where
we are the incumbent andmoving from
copper DSL.
We will present an FTTH bre plan to the
market and to the Polish authorities before
the end of the year.
And then we have a few countries where we
are mobile only this is the case in Romania
and Belgium.
In Belgium, we have a very interesting
situation as it is the only country in the whole
of Europe where the regulator has decided to
regulate cable and to oblige cable operators
to open up their networks, so we will launch
that in 2015 that is one way to go to
convergence.
GF: And in Poland,Netia is looking for a
mobile partner. Is that something youve
looked at?
GP:Wemight look at it, but I think today the
position of big mobile operators is not to
enter into any MVNO agreements that would
be detrimental to their own business.
Maybe somebody will sign with Netia, but
Im not sure we will sign if it is just a way to
push the prices down again.
We already have very low prices in Poland
and it is not appropriate to continue to play
that game.
Q&A
www.telecomfinance.com 17
The fact
that Phones
4u is under
administration
is not only a sign
of something
happening
specically to
Phones 4u, but
also a sign that
the distribution
is changing in
the UK
-
18 www.telecomfinance.com
Slovenian cableco Telemach and Telekom
Austria are reportedly interested in acquiring
Slovenias third-largest mobile operator
Tusmobil.
A local publication quoted Serbian cableco
United Group, which operates in Slovenia
and Bosnia and Herzegovina under the
Telemach brand, as saying the company is
looking at all assets for sale in Slovenia.
These include Tusmobil, Debitel, T-2,
which the District Court in Ljubljana
recently declared bankrupt, and smaller
cable operators.
Unirted, which provides pay-TV, telephony
and broadband services, has reportedly
declined to elaborate as proceedings
are ongoing.
Ljubljana-based Tusmobil could sell for
about 150m (US$188m), the report stated.
Meanwhile, Telekom Austria, which owns
Slovenias second-largest mobile operator
Si.mobil, was also named as a potential suitor
for Tusmobil, which is owned by Slovenian
businessmanMirko Tus Tus Holding.
A spokesman for Telekom Austria declined
to comment on the rumours, citing company
policy. However, he pointed out that its
strategic focus is on convergence and in-
market consolidation in countries it is already
active in.
In Slovenia, we are neither convergent, nor
have we seen any market consolidation yet,
he said.
Meanwhile, a spokesperson for Tusmobil
said the company is not surprised several
companies are interested in buying it as it
has been the countrys fastest-growing mobile
operator for several years. She said: Since it
is our wish to continue to provide our users
with the latest mo