Documenti di Didattica
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January 2008
Corporate Action
3
Our analysis
1 - Business convergence
a - Fixed-Mobile convergence
b - Telecom-Media convergence
c - Telecom-ICT convergence
2 - Domestic consolidation
Our conclusion
1 Favourable opinions on small/alternative operators
Iliad/Neuf Cegetel (major reshuffling in French scenario)
Jazztel (last remaining target in Spain)
Tiscali (more focused business perimeter, interesting user base in Italy & UK)
United Internet (both a consolidator and a target)
Increase ARPU
Alternatives:
Alternatives:
MVNO option
HSDPA
Wi-Max
Wi-Max
M&A
M&A
Target
Country
Ann. Date
Deal value
Note
Telecom Italia
TIM
Italy
December 2004
EUR >14bn
Telefonica
TEM
Spain
March 2006
EUR 3,458
Eircom
Meteor
Ireland
July 2005
EUR 420m
Third mobile op in IE
PCCW
Sunday
Hong Kong
June 2005
USD 249m
Owned a 3G license
Mobilcom
Freenet
Germany
2005
na
Intra-group merger
NTL/Telewest
Virgin Mobile
UK
December 05
USD 1.62bn
MVNO
SBC/AT&T
BellSouth
US
March 2006
USD 67bn
KPN
Tele2 Versatel
Belgium
August 2007
EUR 95m
Vodafone
Tele2 Italy-Spain
Italy/Spain
October 2007
EUR 775m
OTE
CosmOTE
Greece
November 2007
EUR 2.9bn
(EUR bn)
Note
Mobistar/Telenet
3.4
Mobistar/Scarlet
na
Mobistar/Walloon cable
na
Tre/Tiscali
1.6
Vodafone/Retelit
0.2
SFR/Neuf Cegetel
4.7
Vodafone/Jazztel
1.0
1+1
Ono/Yoigo
na
The assets
Technological
Distribution networks
Content digitalization
Telephony uplink
PC penetration
mobile ubiquity, personal
STB
Infrastructure separation in both
Increased bandwidth
telecoms and broadcasting
High-Definition TV
Content
Mobile Television (DVB-h)
Multi-platform competition for content
Regulatory
Public good vs. exclusivity
Interconnection, roaming tariffs
Pay-TV vs. Tlc: content acquisition or
Access to the Local Loop
Market
new distribution channels?
Competition between alternative
Customer contact/audience
platforms (Sat, cable, DTT, DSL)
Pay-TV benefiting from close contact
Internet advertising
and profiling
Sociological
Telecoms having sophisticated CRM,
Social networks
single bill
Internet audience/media consumption
Traditional broadcasters at
disadvantage
Limited interaction with DTT
CONVERGING TELCOS
Drivers
Drivers
Barriers
Investment size
Regulatory barriers
Corporate Culture
ARPU increase
Customer fidelization
Pay Content+ad business model
Barriers
10
Target
Country
Ann. Date
Deal value
Note
Tre Italia
Canale7
Italy
November 2005
EUR 200m
Acquisition of TV infrastructure
Tiscali
Homechoice
UK
August 2006
11.5% of Tis UK
BSkyB
Easynet
UK
October 2005
GBP 211m
Movie investment
France
November 2006
na
Sidus FNH
Korea
September 2005
USD 28m
France Telecom
KT
Several rumoured bids did not materialize (SKY/TI, Mediaset/TI, Sky/Fastweb) in Italy
Main targets domestic broadband players
Customer base more important for traditional broadcasters
Infrastructure more important for Pay-TV
Minority equity deals also likely with incumbents
Likely telecom/media convergent deals
Transaction
Country
(EUR bn)
Note
Prisa/Jazztel
Spain
1.0
Sky/Retelit
Italy
0.2
Sky/Tiscali
Italy
1.6 (Ita+UK)
11
Target
Country
Ann. date
Deal value
Belgacom
Telindus
Belgium
set-05
EUR 575m
Eutelia
Italy
mag-06
na
Eutelia
Bull Italia
Italy
dic-06
na
BT
nm
feb-07
na
BT
I.Net
Italy
feb-07
EUR 100m
KPN
Getronics
NL
jul-07
EUR 1,025m
FT
GTL
India
Jul-07
EUR 30m
Note
Belgacom has communicated clear criteria, plans to develop ICT/consulting business
French IT consulting companies are interested in strengthening their position in Germany. DT has
started talks with US-based EDS, could seek to sell or float a merged entity
Growing new wave revenues
12
2 - Local Consolidation
F2M/ICT/media convergence: see above
Portfolio restructuring
Tiscali focussing on Italy and UK only
AOL exiting the EU ISP market
Vodafone dismissing minority participations
Tele2 selling less profitable ventures
Regulation
Price control (roaming, recharge fees, termination rates)
Easier customer unlocking
Enlarging competitive environment, requiring higher investments:
MVNO
WI-Max
Fibre
Media
13
Date
Bidder
Target
Price
Asset
Belgium
May 07
Ale/Brutele
Walloon cable
EUR 464m
Aug 07
KPN
Tele2 Versatel
EUR 95m
Feb 07
Teliasonera
Debited Denmark
EUR 98m
May 07
TeleNor
Tele2 Denmark
EUR 112m
June 05
TI
Liberty Surf
EUR 248m
Sep 06
Neuf
AOL France
EUR 288m
Oct 06
SFR
Tele2
SEK 3.3bn
May 07
Neuf
Club Internet
EUR 450m
Sep 06
TI
AOL Germany
EUR 675m
Feb 06
Freenet
Tiscali B2C
EUR 30m
Sep 07
UI/Drillisch
Freenet
nm
Dec 05
BT Albacom
Atlanet
EUR 80m
Mar 07
Swisscom
Fastweb
EUR 3.7bn
Jun 06
KPN
Demon NL
EUR 69m
ISP
Sep 06
KPN
Tiscali
EUR 255m
Sep 07
DT
Orange NL
EUR 1.3bn
Jun 07
Sonaecom
Tele2
EUR 16m
Jun 07
Sonaecom
EUR 25m
Jun 05
T-Online
Albura (REE)
EUR 52m
7,500km network
July 05
Tele2
Comunitel
EUR 257m
Nov 05
ONO
Auna Cable
EUR 2.25bn
Oct 06
Carphone W
AOL UK
GBP 375m
Nov 06
BT
Plusnet
GPB 67m
200K BB subscribers
Jul 07
Tiscali
Pipex
GBP 187m
Denmark
France
Germany
Italy
NL
Portugal
Spain
UK
14
Transaction
Fastweb/Tiscali
Wind/H3G (merger)
Country
Italy
Italy
(EUR bn)
1.6
12+8
Note
Would trigger the disposal of UK unit.
Combination of cash/stock
Following failed IPO for both companies,
combination of tower infrastructure
Italy
1.6
France
0.7
France
3.5-7.5
Wind/Tiscali
SonaeCom/Cabovisao/TvTel /PT MM
Portugal
0.7-3.4
Finland
na
UK
4/5bn
Germany
T-Mobile/Three
O2 / Eplus
15
3 - Pan-European deals
FINANCIAL BENEFITS
Cheap cost of money vs. High Free Cash Flow Yield
Untapped re-leveraging potential
Fiscal advantages (Spain)
INDUSTRIAL SYNERGIES
Reduction in the number of market participants (eg UK, Germany)
Combination of local wireline/Wireless operations
International roaming
Multinational customer segment
Procurement
REGULATORY CONVERGENCE
Easier dealing with regulatory issues
Converging view on network separation and media developments
16
T e le n o r
T e le 2
O TE
T e le c o m
Ita l i a
B r i ti s h
T e le c o m
T e l e fo n i c a
KPN
D e u ts c h e
T e le k o m
F ra n c e
T e le c o m
T e lia S o n e ra
B e lg a c o m
V o d a fo n e
0%
P o r tu g a l
T e le c o m
2%
The lack of industrial synergies and the risk of FCF decline in the investment period (>5y) puts
at risk value creation for private equities. We expect however these operators to participate
industrial transactions
17
Debt/EBITDA
Value creation per share
DT
Debt/EBITDA
Value creation per share
FT
KPN
TEF
TI
PT
2,6
2,7
27%
25%
2,7
3,3
3,2
2,7
10%
13%
15%
10%
TLS
2,6
3,2
3,2
2,6
3,4
9%
13%
13%
8%
13%
Debt/EBITDA
3,5
32%
Debt/EBITDA
2,5
3,1
3,0
2,6
3,3
7%
11%
11%
7%
10%
Debt/EBITDA
Debt/EBITDA
Value creation per share
VOD
KPN
Debt/EBITDA
BT
3,5
24%
3,3
3,5
28%
26%
Debt/EBITDA
2,1
2,9
2,7
2,2
3,0
6%
9%
9%
6%
8%
For KPN: PT
For TEF: TI
18
3 Pan-European deals
Strategic Matrix
Target
Buyer
Belgacom
BT
KPN
PT
Telenor
TeliaSonera
DT
Unlikely. No obvious
synergies
Unlikely. The
state will not
give up control
Unlikely. TeliaSoneras
international stakes still shifting
FT
Unlikely. FTs
presence as a
Sonaecom
shareholder
Unlikely. The
state will not
give up control
Unlikely. TeliaSoneras
international stakes still shifting
TEF
Unlikely
Unlikely. Strong
political opposition in
Portugal. Telefonica is
only interested in Vivo
Brasil
Unlikely. The
state will not
give up control
VOD
Possible. Fixed/mobile
convergence; network
separation would attenuate
antitrust concerns
Unlikely. Antitrust
problems with
consolidation in a
three-operator mobile
market
Unlikely. The
state will not
give up control
Possible. Creating a
Scandinavian player + emerging
market assets
19
Main issues
In Italy:
Fixed-line infrastructure separation
National interest
20
4 - Emerging markets
Predominantly mobile markets (eg Nigeria, 32m SIMs against 1.6m fixed lines)
Strong opportunities with mobile penetrations still below 25%
Ongoing privatization processes
Easy migration of best practices and services
Higher efficiencies in infrastructure deployment (Tower sharing, Network outsourcing)
Emerging countries: Main operators exposure as a % of revenues (H1-07)
% Western Europe
% Eastern
Europe*
Middle East/
Africa
North America /
Latin America
Asia/Pacific **
Belgacom
100%
0%
0%
0%
0%
DT
68%
9%
0%
23%
0%
FT
72%
18%
10%
0%
0%
KPN
100%
0%
0%
0%
0%
Mobistar
100%
0%
0%
0%
0%
PT
58%
0%
<3%
39%
0%
Telefonica
4% (Cesky Tel)
0%
38%
0%
TI
0%
0%
15%
0%
Telenet
100%
0%
0%
0%
0%
TeliaSonera
81%
19%
0%
0%
0%
Vodafone***
75%
9%
9%
0%****
9%
Operator
Source: ESN estimates *Includes Turkey; **includes India, Australia; ***as reported H1 08; ****0% in reported revenues and 21% in proportional revenues
Geographical and linguistic reasons lead to Spain and Portugal in Latin America (i.e. Brazil)/Nordic
countries in Eurasia (i.e. Russia, Turkey)/Different operators in Africa (i.e. Algrie, Nigeria, Kenya)
Vodafone the most active (sector-specific, strong balance sheet)
21
Target
Country
Ann. date
Deal value
Vodafone
Telsim
Turkey
Dec 2005
USD 4.55bn
Vodafone
Vodacom
South Africa
Dec 2005
USD 2.43bn
France Tel
Jordan Telec
Jordan
Jun 2006
USD 180m
Vodafone
Vodafone Egypt
Egypt
Dec 2006
USD 180m
Vodafone
Hutch Essar
India
Feb 2007
USD 11.1bn
For 67%, USD 18.8bn for 100% if Essar sells its stake
Maroc Telecom
TI
France Telecom
Note
Gabon Telecom
Gabon
Feb 2007
EUR 150m
Solpart
Brazil
Jul 07
USD 550m
EUR 270m
Telekom Kenya
Kenya
Nov 07
Emerging market asset values have soared (From USD500/user Telsim to USD800 Hutch)
Competition coming from global incumbents as well as local players
Formation of strong emerging market players (Orascom, MTN)
22
(EUR bn)
Note
na
Deutsche Telekom already announced its interest in further acquisitions in Eastern Europe
na
10.0
7.5
7.3
na
Vodafone on Telkom SA
9.6
Vodafone/Vietnamese operators
na
TeliaSonera/Megafon
14
Tele2/Russian operators
na
Vodafone/Vodacom
8.2
GBP 5.5bn - Vodafone already owns 50% of Vodacom Break-up with fixed line
na
na
16.5
TeliaSonera/Turkcell
14
na
Belgacom admits this could be a way for it to profit from increasing traffic
23
COUNTRY DETAIL
24
Belgium
Telecom market:
The incumbent (Belgacom) is majority
owned by the Belgian State;
Presence of three dominant foreign
investors. In broadband mkt: Liberty Global
with Telenet and KPN with Tele2/Versatel.
In mobile mkt: France Telecom with
Mobistar and KPN with Base.
Players strategies
Belgacom
Possible M&A in order to become an integrated solution
provider with a dual market approach (residential/business
customers).
Mobistar
Possible M&A activities in international markets being
owned by a foreign investor (France Telecom)
Telenet
Key drivers
- Tariff regulation
Debt refinancing and re-leveraging:
roaming regulation by European Commission; -to pay Telenets shareholders;
Possible consolidation among MVNO players
-to finance a possible smaller acquisition
- Fixed-mobile convergence
Possible collaboration between Base (mobile)
Broadband market share H1-07
Mobile market share H1-07
and Tele2 (broadband);
KPN
Possible M&A between Mobistar and?
Scarlet
Base
6%
7%
Belgacom
23%
- Scarlet (owning a DSL network)
45%
- Telenet (a cable operator offering fixed voice,
Belgacom
51%
internet and tv)
Telenet
- VOO (consortium of Walloon cable
36%
operators)
Mobistar
32%
25
France
Key drivers
-Fourth licence
Additional price pressure in the mobile market due to
the possible entry of Iliad.
-The strategies of Vivendi and Bouygues
Possible sale of Bouygues Telecom and
consequently entry of a foreign operator in Frances
mobile market.
Possible acquisition by Vivendi of Vodafones stake
in SFR (44%) potentially implying:
1) search of another partner by Vodafone (Bouygues
or Iliad)
2) Acquisition of the minorities of Neuf Cegetel by
SFR
-Fibre optic
Investment plans in FTTH , possible synergies
between operators
Players strategies
France Telecom
Focused on emerging markets (Algeria and Vietnam)
Iliad
Possible acquisition of Alice France if it is put up for sale;
Possible network sharing agreements with Neuf Cegetel.
Alice France
Low market share, limited mobile presence, not looking to FTTH
Bouygues Telecom
Possible target by Altice/Cinven.
SFR
Possible acquisition by Vivendi of Vodafones stake in SFR (44%)
potential subsequent acquisition of Neuf Cegetel minorities by SFR
Other
4%
Other
8%
Alice
6%
France
Telecom
45%
France
Telecom
47%
Neuf Cegetel
18%
SFR
34%
Iliad
21%
26
Operator/Owner
Action
Operator
Total EV
(Eur bn)
Bouygues
Disposal
Bouygues Telecom
high
Acquisition
SFR
22
medium
Buyout of minorities
Neuf Cegetel
7.5
high
Acquisition
Alice France
0.7
high
Vivendi or Vodafone
SFR
Neuf Cegetel or Iliad
Probability Note
EV includes 100% of fourth mobile licence risk
Increasing control stake
27
Germany
Players strategies
Key drivers
-Mobile call price cuts
It is due to aggressive pricing by network
operators KPN and O2.
-Fixed network regulation
End of a protective regulation for DT: European
commission asks for open network access
=> this should benefit alternative operators.
Mobile market share H1-07
O2
13%
Eplus
Deutsche
Telekom
37%
15%
Vodafone
35%
Other
Deutsche Telekom
Unlikely consolidation move
Possible disposal of non-core assets i.e. T-System division-rumours
about talks between DT and EDS.
Freenet
Possible takeover bid by United Internet and Drillisch.
Telecom Italia
Possible search for further broadband target, looking for synergies
with Telefonica/O2.
Telefonica
Minimal presence in the broadband space.
United Internet
The company could be a consolidator, possible deal on Freenet and
Versatel.
Vodafone
Unlikely need of M&A to play its convergent strategy, considering
the ownership of Arcor.
2%
3%
7%
Deutsche
Telekom
44%
Arcor
13%
Hansenet
13%
United Internet
14%
28
Bidder
target
Total EV
(Eur bn)
Freenet
2.3
80%
2.3/4.2
40%
Telefonica
Probability Note
29
Italy
Players strategies
Key drivers
- Tariff regulation
- roaming regulation by European Commission
- Bersani law
-MTR for Tre, Wind
- FTTX
- capex increase => joint deployment plans,
network sharing, aggregation or exit of some
operators
- Fixed-mobile convergence
- Telecom-media convergence
Mobile market share H1-07
Tre
9%
Wind
18%
TIM
40%
Vodafone
33%
Other
6%
TI retail
63%
Telecom Italia
Network sharing the main domestic issue
Possible disposal of the Dutch and French assets;
Looking for synergies with O2 in Germany
Vodafone
Tele2 acquisition to enter wireline/broadband
Possible further deals to strengthen infrastructure or customers.
Fastweb
Some probability of a minority buy-out by Swisscom
Low probability of active consolidation
Tiscali
In spite of renewed growth plans, a prolonged cash burn could
prompt the company to sell the Italian asset.
Tre
Still weak economics. Possible disposal by the parent company
Wind
The company is looking for a minority shareholder, tower disposal,
convertible financing
Retelit
The company is a likely partner for any operator or media company
in search of telecom infrastructure
30
Operator
Action
Operator
Total EV
(Eur bn)
Wind 1
Merger
Tre
12+8
>50%
FT / DT / VOD 2
Acquisition
Tre
10%
Sky
Acquisition
Retelit
0.2
20%
Sky
Acquisition
Tiscali
1.6
5%
Tre
Acquisition
Tiscali
1.6
10%
Vodafone
Acquisition
Retelit
0.2
10%
Wind
Acquisition
Tiscali
1.6
10%
Probability Note
31
BARRIERS
Stretched balance sheet
Control issue (merger of equals in case of no
cash infusion)
Wind
Tre
3Wind
Mobile customers
15.3
8.0
23.3
Wireline Customers
2.3
0.0
2.3
DSL Customers
1.1
0.0
1.1
Revenues
5.2
2.5
7.7
EBITDA
1.8
0.1
1.9
Capex
0.7
0.4
1.1
Fixed assets
6.2
4.0
10.2
EV
12.0
8.0
20.0
Debt*
6.2
3.9
10.1
EV/EBITDA
6.7
nm
10.5
Debt/EBITDA
3.5
nm
5.3
Equity
5.8
4.1
9.9
Employees (000)
7.0
2.7
9.7
32
Our scenario:
United Internet has not over-paid past acquisitions and will most likely seek to acquire Freenet and/or Versatel as cheaply as possible.
We would have expected United Internet at least to increase Freenet holdings to more than 25% before 31 December 2007 (currently
20.05% through joint venture with Drillisch) to secure an option that allows for improved Freenet tax loss carry forward usability. United
Internet could completely take over the joint venture with Drillisch after Freenets MSP business has been sold.
United Internet could start to purchase further Freenet and Versatel shares to acquire the majority. Holdings of more than 30% would
originate a mandatory public offer. United Internet could wait until lower price levels for such an offer are reached (average trading price of
past 90 days according to the Federal Financial Supervisory Authority).
Freenet could pay out another super-dividend.
We believe that the synergy potential through a combination between Freenet and Versatel is large. With its Freenet and Versatel
holdings, United Internet has placed poison pills for any third party acquirer. Hence, the upside for both Versatel and Freenet could be
limited. United Internet itself could be the best investment in the sector.
33
Tis ITA
NewCo
Ita
Mobile cust.
15.3
0.0
15.3
15.3
2.3
0.6
2.9
1.0
3.3
DSL customers
1.1
0.55
1.7
2.6
3.7
Revenues
5.2
0.28
5.4
0.93
6.1
EBITDA
1.80
0.06
1.9
0.17
1.96
Capex
0.70
0.08
0.78
0.2
0.90
EV
12.0
1.6
13.6
Debt*
6.2
EV/EBITDA
6.7
9.5
6.9
Debt/EBITDA
3.5
3.9
3.5
Equity
5.8
1.0
6.7
Employees (000)
7.0
2.8
9.8
2007 est.
0.9
7.9
Tiscali
PF**
Total
34
35
Netherlands
Players strategies
Key drivers
- Consolidation already happened
In Mobile from a 5 to a 3 player market (KPN took
out Telfort, T-Mobile bought Orange)
In broadband, KPN took out Tiscali and several
smaller players
Battle will be between KPN and the cable operators
KPNs move to All-IP likely to trigger further shake
out (Tele2, BBned)
Cable sector has consolidated to two main players
(Zesko and UPC).
Broadband market share H1-07
KPN
Scarlet
6%
7%
Belgacom
51%
Telenet
36%
Base
23%
Mobistar
32%
Belgacom
45%
KPN
KPN focuses on small and medium-sized deals that strengthen
its existing businesses. Key examples have been the
consolidation of its position in broadband, Telfort, and Getronics
(transforming its position in the Benelux business market to
converged telco/IT services)
KPN may look for take-over of mobile operators in adjacent
countries, to leverage the challenger strategy of E-Plus (earlier
mentioned Sunrise as a possible example)
Management takes a disciplined approach to potential deals,
focusing on shareholder value (e.g. ruled out take over of
Bouygues Telecom). So far most of the FCF has been returned
to shareholders through dividends and buybacks
We expect KPN will become a target itself once panEuropean sector consolidation takes off:
Efficient operations, relatively high FCF yield, medium
size
the strategic value of the German mobile assets
the absence of State influence (contrary to most of the
other medium sized players)
36
Nordic countries
Players strategies
Teliasonera
Focused on expansion in the Eurasian region (now more than 40% ebit
comes from growth regions Turkey, Russia and Eurasia);
Potential acquisition target.
Telenor
Possible investments in eastern Europe, Asia and Northern Africa.
Tele2
Pulling back on non-core European investments; possible further asset sales;
Concentration on the mobile core business especially in Russia.
TDC
Focused on domestic market.
Elisa
Unlikely acquisitions outside Finland;
Likely consolidator in domestic market (with wireline players).
Sweden
Mobile market share H1-07
Telenor
18%
Tre Others
5% 1% TeliaSonera
47%
Tele2
29%
TeliaSonera
37%
Ownership
Potential buyers
Teliasonera
SEK 264bn
European operator
Telenor
NOK 216 bn
TDC
DKK 54 bn
European operator
Operator
Action
Operator
Total EV
TeliaSonera
Acquisition
Turkcell (Turkey)
EUR 14 bn
na
TeliaSonera
Acquisition
MegaFon (Russia)
EUR 14 bn
na
TeliaSonera
Acquisition
Emerging mkts /
Eurasia
na
na
Tele2
Acquisition
Russian operators
na
high
Telenor
Acquisition
Eurasia
na
high
Norway
Finland
NextGenTel
13%
Other
8%
Telia
25%
Elisa
40%
Telenor
50%
TeliaSonera
40%
Telenor
53%
Others
1%
Finnet
14%
TDC
42%
Telenor
25%
Probability
Denmark
Netcom
30%
Com Hem
16%
Bredbandsbolaget
23%
Mkt cap
Others
11%
Elisa
34%
TeliaSonera
29%
TDC
59%
37
38
Portugal
Key drivers
-Tariff regulation
-Consultation process initiated by regulator to
implement changes in MTR;
- Request to the regulator to reduce the high
spectrum cost in order to mitigate the MTR
impact.
-Fixed/Mobile convergence
protect own customer base
offer differentiated services
increase the ARPU
Bundled package w/fixed communications and
ADSL services by Vodafone;
Spin-off of PT Multimedia
Novis
10%
ONI Other
5% 5%
Players strategies
Portugal Telecom
-Dominance in all major segments (broadband internet, fixed,
mobile, pay-tv) and leading mobile operator in Brazil (jv with TEF).
Possible disposal to TEF of its stake in Brasilcel and acquisition of
a stake in Telemar or Brasil Telecom (see slide 23)
- Aim to consolidate and restructure its operations in overseas
markets (besides Brasil also Africa see slide 23 ).
- Spin-off of its 58.43% stake on PT Multimedia (30th October)
PT Multimedia
After the spin-off, PT Multimedia can be a potential M&A target but
the company will likely maintain its independence (see slide 15).
Sonaecom
Increase of direct and indirect telecommunications services due to
consolidation process (acquisition of Tele2 Portugal and SoHo
business from OniTelecom see slide 14 )
Mobile market share H1-07
PT Multimedia
25%
Optimus
17%
Caboviso
10%
Portugal
Telecom
45%
Vodafone
37%
TMN
46%
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Spain
Key drivers
-A Market 4-player market (TEF, VOD, Orange, ONO)
Small players are focused on special segment of the
business (i.e. Jazztel in broadband, Yoigo in mobile)
-Dominance of the incumbent in fixed-line business,
broadband and mobile
-TEF share in broadband SOHO (accounted as retail) is
over 70%. Penetration in this segment has reached 80%
- Strong spread in prices between incumbent and
competitors: EUR 35 Orange triple play vs. EUR 65 TEF
-Fixed-mobile convergence: first offer has recently
appeared (ONO, EUR 7/month flat tariff)
-Telecom-media convergence: TEF owns 17% of SGC
-Regulation: easy for the incumbent, network separation
not expected
Mobile market share H1-07
Players strategies
Telefonica
-Price hikes starting 1st of January: over 2% in most of the
cases (line rental fee, national calls, bundle offers)
-Migration from unique voice to bundle offers: still room
potential (only 30-35% with combined products)
Vodafone
-Mobile: similar prices than TEF, fostering on-net traffic
-Broadband: Tele2 is not enough in terms of accesses
Orange:
-Very aggressive pricing policy
ONO:
-Starting as MVNO (ONO io), completing the range of
services
-MVNOs
-Not very successful yet till they launch a flat tariff
Broadband market share H1-07
Orange
24%
Vodafone
31%
Telefonica
Moviles
45%
Jazztel
4%
Orange
15%
Other
9%
Telefonica
56%
ONO
16%
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Telefonica
Europe
Germany: 4th largest mobile operator (12m clients), while in the other 20 markets TEF is the leader or the 2nd,
requiring size in a very competitive environment with double digit decline in ARPU. Likely candidates: Freenet (EUR
1.6bn. 5.5m mobile users and 1.2m DSL), United Internet (EUR 3.9bn), Versatel (EUR 1bn). Others: E-Plus (owned
by KPN), Hansenet (TI), Drillisch, Debitel (owned by venture capital).
Telecom Italia: deal is not envisaged in the short term, but likely in 3-year timeframe (contributing synergies in EuropeBrazil)
LatAm
Brazil: acquisition of 50% Brasilcel (owns 63% Vivo): blocked at the moment till Portugal Telecom finds another
operator in that market (Telemar?). The deal could cost ca. EUR 4bn (over 10x EBITDA08e), way above our
valuation, although potential synergies with Telespi and TIM (not right now due to regulator restrictions) can be justified
Mexico: searching an operator for broadband expansion in a market of over 100m pop. and totally dominated by
Telmex (>90% share)
Operators which are not in the pipeline: Bouygues Telecom, KPN and OTE
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FCF destruction implies competitors may wait for a cheaper break-up value: CF burn has
been reduced strongly, with EBITDA break-even and very low CAPEX (below EUR 30m/year)
Very little progress in capturing new connections: no additions during the year
Bond convertible will mature in 2010: EUR 275m
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UK
Players strategies
Key drivers
- Telecom-media convergence
-Acquisition of Easynet by Sky;
-Acquisition of Homechoice by Tiscali
- Fixed-mobile convergence
-Acceleration of F2M through M&A, especially by TMobile and 3.
- Telecom-ICT convergence
-BT aiming to become a global provider of IT and
networking (Infonet and I.net deals by BT)
Mobile market share H1-07
T-Mobile
24%
Vodafone
24%
Three
6%
O2
25%
Orange
21%
other
8%
BT retail
27%
SKY
5%
Orange
7%
CPW/AOL
16%
Virgin Media
24%
British Telecom
Possible further delas to increase its market share in broadband market;
Possible deals to strengthen in the ICT segment.
BSkyB
Possible of further deals to accelerate its growth trend in broadband
C&W
Possible split of its UK and intl operations in view of a separate sale to private equity.
Carphone warehouse
Possible active player in the telecom M&A.
O2
Possible player in the broadband M&A.
Orange
Looking for a recovery of its DSL activities
Three
Disposal option is more likely than external growth. T-Mobile is a potential bidder.
Tiscali
Gained critical mass with Pipex. More likely a target than an active consolidator.
Vodafone
Partnership model with BT in ADSL
Possible player in M&A (see the recent deal with Tele2) also abroad (see next slide)
Virgin Media
The company has put itself up for sale.
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BT
Local Consolidation
Small broadband providers
BT has the financial capacity to buy small broadband providers and has already completed similar
deals like PluseNet. These add ons increase its broadband customer base and may also improve
its expertise in the area.
Telecom/ICT convergence
ICT companies globally
BT has the financial capacity to buy ICT companies around the world and has already completed
similar deals such as Infonet and Albacom to broaden the geographic scope of BT Global Services
and its expertise.
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Bank Degroof
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CM - CIC Securities
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Phone: +33 1 45 96 77 04
Fax: +33 1 45 96 77 88
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