Mergers and acquisitions will change the digital communications landscape in Europe in 2022, Access Evolution

M&A activity in the digital communications sector in Europe is expected to intensify in 2022 as the region’s landline, mobile and cable operators reassess the strategic and fiscal value of their current assets and seek cost savings. ‘scale in a market vital for consumers, businesses and governments, but also increasingly financially precarious as competition intensifies and the costs of deploying FTTH and 5G put pressure on balance sheets.

The main telecom operators in the region have already made noise about the need for greater consolidation in a region which still houses dozens of infrastructure-based operators: Orange and Vodafone have been recently expressed the need for mergers in the Spanish market and reportedly even discussed the possibility of a true ‘merger of equals’ at the group level about a year ago (an idea that was put aside when it became clear that the required state support French would not be available).

The Spanish market has already seen a major deal in 2021 when MásMóvil acquired Euskaltel in a deal valued at more than € 2 billion. (See MásMóvil set to integrate brands as Euskaltel offer crosses final regulatory hurdle.)

Italy could witness the biggest and most important M&A deal as one of Europe’s biggest and best-known operators, TIM (Telecom Italia), is already considering a change of owner as the board considers a € 10.8 billion takeover offer from private equity firm KKR. . (See KKR offers 10.8 billion euros to privatize Telecom Italia.)

Closely linked to this decision is the potential merger of FiberCop, the fixed access unit of TIM (of which KKR is already a shareholder), with the national broadband broadband player Open Fiber to create a single national access operator. fixed for Italy. This long-standing agreement will only progress if political and regulatory approvals are obtained, and the news is more positive on this front because, Reuters reports, it appears that the public investor CDP is once again arguing in favor of the merger of FiberCop and Open Fiber.

But it is not just about the big Tier 1 players: in Italy, Tiscali and Linkem come from announced its intention to merge its activities to create a unique group that will have around 1.2 million customers and a market share of almost 20% of the country’s very high-speed services sector. The merger, which will see Linkem become the controlling shareholder, will involve the integration of Tiscali’s broadband fiber activity with Linkem’s fixed wireless access (FWA) operations. The companies hope that the merger “will generate significant industrial synergies and take full advantage of the opportunities arising from the implementation of the Italian National Recovery and Resilience Plan (‘PNRR’) through an integrated fixed, mobile, 5G offer. , cloud and smart city. services.”

Tiscali CEO Renato Soru said: “After making a fundamental contribution to the spread of Internet services in our country, over the past two years, Tiscali has redefined its business and created the conditions to be well positioned in the industry. offer of Cloud services and thus contribute to the challenge of the digital transition which, in the coming years, will involve the public administration and the whole Italian economy. The integration with Linkem Retail is an important step for the further development of services dedicated to both families, with particular attention to those in the areas of the digital divide, and to businesses and public administration. Together, we will double the size of our company, but above all we will have the opportunity to pursue our common growth project with greater force. With this integration, and with new and important partners, Tiscali can look confidently to the future with renewed growth prospects. “

Tiscali and Linkem will no doubt seek to capitalize on the uncertainty surrounding TIM and FiberCop.

The UK is another market where the growing value of fiber-optic broadband network assets has been the catalyst for mergers and acquisitions discussions. its stake in the national operator at 18%, although the introduction of National Security and Investment Law could be an obstacle to any comprehensive takeover plan the billionaire businessman could harbor.

Key to Drahi’s attraction is Openreach, the near-autonomous wholesale fixed access division of BT, which is currently injecting billions of pounds into expanding its fiber-optic access network in a bid to cross 25 million premises by the end of 2026. Openreach is just one of many companies currently investing heavily in UK fixed access infrastructure – in fact, there are so many players on the market right now that it is only a matter of time before consolidation cuts the numbers down and delivers attractive returns to the legion of infrastructure funds and private equity firms that have thrown money in. the UK trenches. (See UK FTTH / P sector slated for inevitable consolidation, say carrier executives and the rise of high-speed fiber altnet in the UK.)

In Germany, Deutsche Telekom is set to experience a busy M&A year, with CEO Tim Hoettges looking to strike a deal for the German giant’s tower assets while weighing whether to keep DT’s 12% stake in BT and apparently thinking about an alternative ownership arrangement for the T-Systems business service unit. (See Deutsche Telekom CEO to fish (again) for deal on towers.)

Telia, which has restructured its portfolio to focus on its core Nordic activities in recent years, has continued to optimize its assets: it has just finalized the sale of a 49% stake in its tower activities in Finland and Norway at Brookfield and Alecta as part of an agreement valuing this tower activity at around 1.5 billion euros. The deal was first announced in June of last year.

And today, the Swedish telephone company announced the sale for only 10.75 million euros of the business services unit Telia Latvia to the fixed-line operator Tet, in which Telia has a stake of 49%. (See Telia Company in the agreement to sell Telia Latvia to Tet.)

In Belgium, Orange announced late Christmas Eve that after a period of exclusive negotiations, its Belgian subsidiary had accepted the acquisition of Voo as part of an agreement which values ​​the broadband cable operator at 1.8 billion euros. “This acquisition strengthens Orange’s leadership in convergence in Europe and confirms the Group’s long-term commitment in Belgium,” said Mari-Noëlle Jégo-Laveissière, Deputy Managing Director of Operations of Orange Europe.

“This operation is based on a strong industrial project, relying on the complementarity of Orange Belgium and VOO”, added Jégo-Laveissière, who had hinted at future agreements for Orange. at a press conference in October. For more details on the acquisition project, see our November article: Orange is getting closer to its Belgian broadband loot.

Expect to see more M&A action in Central and Eastern Europe as well.

United Group, which has telecommunications and media operations in eight South Eastern European markets and is owned by buyout company BC Partners, is expected to announce the completion of its nearly € 1 billion acquisition of Wind Hellas in Greece this month after unconditional approval from the European Commission for the deal. United Group announces that it will combine Wind, which has more than 4.2 million customers for its broadband, mobile and TV services and annual revenues of more than 500 million euros, with Nova (formerly Forthnet) , its provider of fixed-line telephony and pay-TV services. in Greece, to “create a fully converged operator which will be the second largest player in the market in fixed and pay television services”.

Meanwhile, the Hungarian IT and communications services specialist 4iG continues to expand its regional empire, after having completed the acquisition broadband, TV and fixed voice service provider DIGI, a move that makes it one of the largest telecommunications operators in Hungary. This agreement came about just a few weeks after the announcement of the planned acquisition of a majority stake in ALBtelecom, Albania’s largest fixed-line operator, and a separate agreement to buy Albania’s second-largest mobile operator, ONE Telecoms: this agreement is expected to be concluded in the coming weeks. 4iG also recently completed the acquisition of Telenor Montenegro.

It’s hard to imagine that M&A activity in Europe will slow down as existing operators seek scale and private investors spy on a return opportunity on the increasingly valuable network assets that underpin digital economies, be it fiber or radio access network infrastructure, mobile towers, distributed data centers or industrial IoT platforms that are now gaining in value as private networks become most popular.

But as always, the scope, size and impact of the business could be tempered by regulators and competition authorities, as neutral host giant Cellnex will tell you, which has reached the limits of mergers and acquisitions in as part of its plan to acquire the assets of the British Hutchison cell tower. … telecom operators like Orange and Vodafone will demand a less combative attitude from the authorities in the next 12 months.

– Ray Le Maistre, editorial director, TelecomTV

Mary I. Bruner