Telephone/cable industry moves
The telephone deals have been coming fast and furious this year and the number of buyouts and spin-offs keep growing as companies jockey for an advantageous position. And as the cable industry is now inextricably tied up with the phone industry, we count those deals as well. Here are some of the recent ones.
Rebirth of AT&T
In November, US telephone giant SBC (originally Southwest Bell Corporation) changed its name to AT &T. The Baby Bell became the Ma Bell, based on its acquisition on the remaining AT&T Corporation and its name.
Alltel sells off land lines
Alltel, which is a player in both land line telephones and in cell phones, is spinning off all its land line operations. The Alltel land line operations cover 3 million customers in 15 states, all in rural areas. The company would then become a wireless company only, one with some 11 million customers.
Alltel is merging the spun off capacity with Valor, a smaller land line company with about 500,000 customers, mostly in Texas and Oklahoma.
The purpose of the move? According to a Wall Street Journal article ("Alltel to Spin Off
Landline Unit In Deal With Valor", 12/9/2005), "it would make Alltel … a potential takeover target for wireless companies in search of more customers and wireless spectrum." Alltel is still too small a player to compete against Verizon, SBC, and Sprint. The company has , thanks to the absorption of other rivals by those three companies, to be the #5 cell phone company, but being #5 in a market is not what stockholders want.
And it's not the only company selling off land lines. Sprint Nextel (formerly Sprint) plans to sell its local telephone operations lines by mid-2006. Even Baby Bells Verizon and AT&T (formerly SBC) are thinking of selling off their land lines. Clearly, industry insiders don't give conventional telephone service much value any more, given wireless, Internet, and VOIP growth.
Vodafone buys Turkish cell phone company
Vodafone, the world's largest cell phone company, recently got out of the Swedish phone market, but it shortly moved into Turkey. It bought Telsim, the #2 cell phone provider in Turkey, with a 25% market share. The deal was for $4.5 billion. The company sees an opportunity for growth, as cell phone penetration is still around 50% in the country, as opposed to mature markets in other European countries.
The #1 Turkish cell phone company is Turkcell, with 27 million customers. #3 is Avea, a partnership between TIM (Telecom Italia Mobile) and Turk Telecom, with 6 million. Telsim has 8 million subscribers and is growing fast, with a round 50% growth over the last year.
Swedish cable company bought
Two major US equity groups, Providence Equity Group and the Carlyle Group announced they would by Swedish company Com Hem AB in a $1.2 billion deal. Com Hem is Sweden's #2 provider of cable TV and high-speed Internet services. The company, with its 1.6 million customers, falls under the "triple-play" term, that is, TV, broadband, and telephony though one pipeline. This follows the purchase earlier this year of Com Hem rival Bredbandsbolaget by Norwegian rival Telenor. Telenor also recently purchased Vodafone's Swedish operations.
Danish telecom company bought in largest European equity deal
TDC AS announced it would be taken over by a group of equity firms including Apax Partners, and Providence Group (see above), the Blackstone Group, KRR, and Permira. The $12 billion deal would be the largest private equity deal ever in Europe.
TDC has both land line and wireless operations in Denmark, Germany, Switzerland, Poland, Lithuania, and the UK.
TDC has a complex history over the past decade. The company started life as Tele Danmark in 1995, when the Danish government bought out four regional phone companies. For nine years, the company was 43% owned by US Baby Bell Ameritech, which was later (1999) sold to SBC, (now renamed AT&T). In 2004, SBC sold its stake in the company. Tele Danmark, meanwhile, changed its name to TDC in 2000 as it started to expand into other countries. Confusing enough? The equity purchase is unlikely to be the end of the story, as the company is likely to be spun off or sold off in the next few years.
A new US cable player
Cebridge Connections, a small cable provider form the Midwest, jumped to the #8 position among US cable companies by buying some assets of Cox Communications, the #3 cable provider. Cebridge bought mostly rural systems, not geographically connected to the main Cox network. Cox family owners reportedly sold the networks to help finance taking the company private, which it did in 2004. The purchase involves some 1 million subscribers.
