A Busy M&A Year For Spanish Telecommunications

A Busy M&A Year For Spanish Telecommunications

A Busy M&A Year For Spanish Telecommunications

A new wave of M&A activity is gripping the European telecommunications industry as operators join forces to boost market share and financial muscle against the backdrop of the global economic crisis.

Vodafone’s 7.7 billion euro cash buyout of Kabel Deutschland in June was the UK operator’s biggest deal since 2007 and was a shot in the arm for the sector worldwide, sparking talk of further acquisitions on the cards. US operator AT&T is rumoured to be keen to snap up a major European mobile network to escape growth restraints in its home market and build up fresh revenues elsewhere. It certainly has deep enough pockets to close such a deal.

European telecoms regulators are also in favour of more consolidation and are now introducing a package of reforms designed to encourage European-wide integration.

So what role will Spanish telecoms giant Telefonica play in this industry re-structuring? In the last few months, the Spanish telecommunications company has certainly not let the grass grow under its feet.

TELEFONICA SPEARHEADS EUROPEAN M&A

In July, Telefonica announced it had agreed to buy E-Plus, the German subsidiary of Dutch operator KPN, for around eight billion euros. The acquisition will make Telefonica the second largest European operator by number of mobile customers and revenue volume.

The E-plus deal was the culmination of a busy year for Spain’s flagship company, during which it sold its UK broadband business to BSkyB for 200 million euros and its Irish subsidiary O2 Ireland to Hutchison Whampoa for close to 850 million euros.

These asset sales were driven by Telefonica’s strategy for disposing of non-strategic assets,  freeing up cash to pay down debt and boost its presence in growth markets like Germany. And there could be more sales in the pipeline, according to some market experts, who suggest Telefonica may offload its Czech Republic subsidiary.

TELEFONICA AN M&A TARGET?

Telefonica’s recent protagonism in European telecoms consolidation and its strong position in Latin America makes it an attractive acquisition target. But in June the operator slapped down rumours that AT&T had mounted a surprise 70 billion euros takeover bid which the Spanish government blocked.

Buying Telefonica would make AT&T the biggest telecoms company in the world, with a market capitalisation of almost 300 billion euros, according to analysts. Spain has mechanisms, however, to stop the sale of any company deemed strategic to the national economy.

So does that mean Telefonica’s future is safe? As consolidation gathers momentum in a competitive industry like telecoms, more bid attempts cannot be ruled out.

For more information on M&A in Spain in the Spanish telecoms industry, contact corporate law firm Argali Abogados.

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