European Telecom M&A Picks Up In 2014

As expected, a wave of M&A activity among European telecoms has begun. Last week, UK’s Vodafone bought Spain’s Ono for $10 billion. Vodafone most recently sold a 45% stake to Verizon Wireless valued at $130 billion.

When Vodafone purchased Kabel Deutschland for $7.7 billion euros last July, Capstone predicted an increase in M&A activity in 2014 due to an improved economic environment and regulatory reforms. This analysis still stands. Reuters Breakingviews also forecasts a rise in European telecom M&A, following a string of cable M&A activity.

Multiple factors are fueling consolidation among European telecoms. These include cheap debt due to historically low interest rates and a growing number of companies involved in M&A amid a rising stock market that has led to more public offerings.

In addition, we see consolidation fueling consolidation as executives worry about being left behind by competitors, including those overseas. The European telecom market is overpopulated and segmented, leaving few players with the size necessary to undertake the massive CAPEX needed to sustain growth and modernize telecoms.

Here are some telecom companies to look out for as M&A activity picks up:

  • AT&T – While AT&T says the window for wireless deals in Europe may be closing, there may yet be potential for a deal. As of January, AT&T was still considering a takeover of Vodafone; given Vodafone’s latest M&A activity, this now seems unlikely.
  • Hutchison Whampoa – Last year, Hong Kong’s Hutchison Whampoa purchased Telefonica’s Irish unit for $1.1 billion. Its chairman, Li Ka-Shing, announced it is considering more acquisitions in Europe for 2014.
  • Telefonica – The European commission has raised concerns over Telefonica’s acquisition of E-Plus for $11.5 billion. Despite this, Telefonica reportedly is close to buying a 56% stake in satellite TV provider Prisa.
  • Vivendi –Vivendi has agreed to exclusive talks with Altice for its mobile phone unit.
  • Vodafone – After its latest cross-border deal, there are rumors that Vodafone may turn its attention closer to home for its next acquisition.
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