FT / Teliasonera €34bn deal

Publié le par Jean Arnal


FT announced this week a bid worth €34bn to takeover Teliasonera, one of the largest takeover bid in Europe. Up to now, FT permanently repeated its strategy was to grow in emerging markets, and it has recently bought assets in Middle East and Africa. So why make a deal in Europe and why Teliasonera? My concern is not to deeply analyze the financial benefit/ burden of such a deal, but let me put on the table just few strategic items. The European telecom market is very fragmented, with several competitive access providers challenging the old incumbents. They are all facing a decline in wireline activities and growth in mobile business, and most of them will have to move to FMC then IMS with a next-generation network. Current broadband networks could not provide enough bandwidth mid-term, and 4G is on the horizon. Investments will be huge and size could be a key factor for success. We can think that long-term, there will be few pan-European giants and a lot of small local operators. So the question now is how to be in the top 3 in five or ten years. In addition, concentration has already begun, and without returning some years back (Telefonica overtaking O2, FT buying Orange, ...), more recent deals include Telefonica and Telecom Italia, and DT taking control of OTE. So the move is already there, and seats would become more and more expensive. If a deal between giants is excluded (such as DT/FT, or Vodafone/FT), Tier 2 players are the most interesting targets when dealing with size/ population coverage and revenues. From this point, the choice of a deal in Europe is positive. The choice of Teliasonera could also be positive. First it is a European company and as such enterprise governance will be easier to define and implement. Secondly, FT and Teliasonera have few geographical overlaps (except Spain). Third controlling Teliasonera would give FT exposure to a new developed market (Scandinavia) as well as exposure to emerging market growth (in Eastern Europe and Turkey). The fourth reason is opportunity: the Swedish government wants to sell most of its stake (37%) in Teliasonera. Perhaps FT is threatened to see someone else bidding and prefers shooting first. Fifth, Teliasonera is an incumbent: culture is the same, working together would be easier,... Is it to say that everything is clean and rosy? Surely not! Such a deal would mean that potential synergies are weak, that FT would inherit conflicting relations with Turkcell and Megafon, and that political and national interests could undermine the realization of the deal.

I just noticed that FT said it is not binded to Teliasonera and is looking to other potential deals. Telenor (curiously same area, same exposure to emerging markets) was on the list, giving some logic and strategic background to such a move. To be continued......

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