The merry-go-round of mobile operator M&A continues to spin, with all eyes on Latin America.
As America Movil is reported to be in talks about offloading some of its Mexican assets to satisfy new competition regulations, a frontrunner is understood to be AT&T. The US firm previously backed away from many of its Latin American holdings but is now said to be interested in the networks that Movil plans to put up for sale in states along Mexico’s east coast. The price would be about $17.5bn, say sources, and other candidates include SoftBank, China Mobile and Canada’s Bell Mobility.
“If we weren’t looking at Mexico and Latin America more broadly and thinking about what opportunities there were to further shareholder returns down there, and begin to diversify our revenue sources, I think we’d be asleep at the wheel. So yeah, we are intrigued by it,” AT&T’s chief strategy officer Stankey said.
Movil may be downsizing in its homeland, but it may expand elsewhere, and is reported to be in talks to acquire TIM Brasil. The company already owns Claro, Brazil’s third largest cellco, while TIM is the second. Reuters says the Mexican giant is in talks with rivals Oi and Vivo about mounting a joint offer worth about BRL30bn ($13bn), though the stakes would have to be structured to satisfy regulatory concerns. Vivo is owned by Telefonica, which is in the process of acquiring Brazilian fixed line carrier GVT from Vivendi. In the process it will offload its interests in Telecom Italia, which had also wanted to purchase GVT to boost its TIM Brasil unit. That failure may spur it to sell that subsidiary, hence the interest of the other cellcos.
Telecom Italia has previously insisted that TIM Brasil is a strategic asset which is not for sale, but is understood to have softened its position after the GVT setback and amid its ongoing debt problems at home. However, it could also look for other options to strengthen its own hand in Brazil and stay in one of the world’s biggest mobile growth markets, and the most likely route would be to make a play for Oi, the fourth cellco. Sources told Bloomberg that any purchaser would have to take on Oi’s $20bn of net debt, but would gain a fixed line network as well as a cellular operation. A bid could also pre-empt a possible offer for TIM, from Oi – which hired Banco BTG Pactual last month to help it acquire a stake in the Italian-owned player – or from the three-way alliance led by Claro.
Latin America is not the only scene for operator M&A intrigues. In Europe, Vodafone has been on a spree to acquire fixed line companies in Germany, the UK and most recently Spain (Ono), but could be open to a far bigger deal, with Liberty Global, the multinational cable group. The two firms have become arch-rivals since they started to tread on one another’s toes – Vodafone by buying cable firms and Liberty by adding wireless strands to its bundles via aggressive WiFi build-out as well as MVNOs. As both chase the quad play, Vodafone CEO Vittorio Colao told the Goldman Sachs conference in New York that he would consider “transformational M&A”, and that Liberty could be a good fit.
Other, smaller European deals are all about fixed/mobile convergence too. In Spain, Orange has made a $4.4bn, €13-per-share offer for fixed line carrier Jazztel, though Alken Asset Management, the second largest shareholder in Jazztel, has dismissed the price as too low and is holding out for €20 a share. Orange says the combined entity would generate up to €1.3bn in synergies but the investment firm argues that €3bn is a more realistic figure and so the valuation should be higher. But analysts at Macquarie Capital wrote in a research note that Orange had “overpaid by around €1bn, in our view”.
The French carrier needs the support of shareholders with at least 50.01% of Jazztel’s capital – chairman Leopoldo Fernandez Pujals, who holds 14.5%, has committed to support the deal, as have two other executive members of Jazztel’s board, CEO Jose Miguel Garcia Fernandez, and general secretary Jose Ortiz Martinez.
If Orange’s offer is successful then it will create Spain’s second largest fixed broadband operator and strengthen its mobile business, which is third in the market, by adding the option to offer multiplay bundles. The Spanish market has already started to consolidate, with Vodafone acquiring cableco Ono in July. And Jazztel itself said last week that it was in discussions about acquiring TeliaSonera’s majority stake in Yoigo, Spain’s smallest operator, though that potential deal will not happen if Orange prevails, as it has no interest in Yoigo.
Meanwhile, Nordic operator TDC is also following the convergence trend and has agreed to pay NOK13.8bn ($2.2bn) for Get, a cable TV provider in Norway. It will not be developing a quad play any time soon though, since its mobile activities in Norway are confined to a small MVNO. Instead, it will look for economies of scale and a broader reach by combining Get with its Danish quad play offering, YouSee.