14 April 2008
by Alex Scroxton
The latest Telecoms M&A Insights report from financial services specialist PricewaterhouseCoopers (PwC) has revealed that consolidation in the telco sector in the US and western Europe is on the verge of collapse — but the findings have been criticised for potentially damaging national markets during the current period of uncertainty.
"There’s a completely different sentiment at grass roots level," argued one comms dealer. "The reality is that these big analysts take their figures from governments who have been looking at the same economic factors for 20 or 30 years and never really get it spot on.
"The [UK] market is very buoyant and we will see more acquisitions here too," he added.
PwC revealed that on a global level, disclosed deal value fell from €332bn in 2006 to just €185bn last year, with only one deal — in Latin America — exceeding €20bn.
According to PwC partner and TMT strategy leader Philip Shepherd, 2007 was a curate’s egg as far as telco deals went: "Funding conditions for the first three quarters promoted a high level of activity, particularly by private equity, followed by the cloud of the credit crunch in the fourth quarter."
The number of deals carried out in central and eastern Europe (CEE), MEA and Latin America jumped last year to 22 per cent of global deal activity, compared with 11 per cent in 2004. Shepherd said he believed the Middle East in particular displayed the most potential for future mergers and acquisitions among telcos. He pointed to the acquisition of Kuwaiti mobile operator Wataniya for €2.8bn by Qatar Telecom, and Saudi Telecom’s acquisition of a 35 per cent stake in Dubai-based comms powerhouse Oger as good examples.
The channel argued that as well as increased activity among local incumbents, large European players were tempted by the thought of getting "more bang for their buck". Vodafone’s entry into the Indian market with the purchase of Hutchison Essar backed up the claim.
"BT has obviously gone global, as you have to be a global player these days," one industry watcher remarked. "There are big opportunities out there."
