Global Telecom World Currently Awash With Mergers & Acquisitions

The telecoms world is currently awash with major M&A activity – Bharti is close to completing its acquisition of many of Zain’s African operations, America Movil is pulling Carso Group (Telmex and Telmex Internacional) back into a single fold, Orange UK and T-Mobile UK are rolling their operations into a joint venture, and both Telefonica and Liberty Global recently completed acquisitions in Germany. The past year also saw consolidation of service providers in some key markets, including Brazil, South Korea and the United States, while 2010 should finally see some long overdue consolidation of operators in Russia.

What common thread is driving these activities? A recent round of service provider benchmarking analysis provides some answers. With telecoms market growth rates declining and not forecast to return to previous levels, organic growth is proving to be more difficult for some companies, and virtually impossible for others. There are some clear consequences.

Aggressive growth-oriented companies that are determined to bulk up and join the ranks of the largest operators are having to rely more on acquisitions – Bharti is a perfect example. Other companies, such as Deutsche Telekom, have already diversified geographically, but are under increasing pressure to improve financial performance, and are focusing on cost savings and margin improvement. In the middle sits Telefonica which has historically grown through aggressive international expansion, but which has managed to maintain above average profit margins. It can afford to seek out further acquisitions without incurring the wrath of investors.

'The natural urge to maximise growth and gain global market share remains, but is now tempered by a need to focus more on profit margins,' said TeleGeography’s John Dinsdale. 'While it may be counterintuitive, many of the world’s largest service providers have among the lowest margins, which restricts their M&A options. Expect the bolder acquisitions to come from smaller operators and those whose actions are not constrained by unhappy shareholders,' he added.

TeleGeography’s service provider benchmarking research includes analysis of revenues, profitability, subscribers, ARPU, growth rates, geographic footprint, market share, competitive positioning and future growth prospects. It is published as part of TeleGeography’s GlobalComms Insight service which is a companion to the GlobalComms Database, a regularly updated online database of wireline, wireless and broadband competition. No other telecoms market research service rivals their collective geographic scope and depth of coverage.
- TeleGeography.com

Vodafone Signs Deal With Libya's Al-Madar

 Vodafone says that it has signed a non-equity cooperation deal with Libyan state owned mobile network, Almadar Aljadid (Al-Madar) to offer Vodafone branded services in the North African country.

Under the terms of this agreement, Almadar Aljadid will have exclusive access to Vodafone's range of products, devices and services in Libya. In addition, Vodafone will be able to use Almadar Aljadid's network to offer its customers a range of services, which utilise 'home' network capabilities as well as extended coverage within Libya.

The partnership will also enable multinational companies located outside Libya and with local operations to meet their needs for unified communications, centralised customer care and Vodafone services using Almadar Aljadid network.

Commenting on the agreement, Colin MacDougall, Vodafone Partner Markets director for Africa and the Middle East, said: "We are delighted to partner with Almadar Aljadid in order to better serve our business customers' communications requirements as they look to grow their operations in Libya."

Leaked Ghana Report Claims Vodafone Deal Was Illegal

A leaked Ghanaian government report, seen by the BBC, claims last year's sale of a 70% stake in the country's incumbent fixed line operator Ghana Telecom (GT) to the UK's Vodafone Group was 'unconstitutional and illegal-, and did not represent good value for money.

In July 2008 Vodafone confirmed that it had agreed to acquire a 70% stake in GT for USD900 million on a debt-free, cash-free basis. The deal implied a total enterprise value for GT of approximately USD1.3 billion, with the state retaining a 30% stake in the company.

However, the leaked report alleges that the fixed line operator was undervalued and that the actual price paid by Vodafone was less than USD267 million. Further, it accuses parliament of acting unconstitutionally in approving the deal without due process, and alleges that as a result of 'a complicated series of financial arrangements' the actual price released was far less than the stated asking price.

Vodafone Buys Out Shady Safaricom Shareholder

It has been reported by a Kenyan daily that UK telephony giant Vodafone PLC has brought out its controversial minority shareholder in its Kenyan subsidiary. The Daily Nation newspaper reported that Vodafone may have paid as much as Sh6 billion (US$100 million) for the stake in its local holding company held by Mobitelea.

As we understand it, when Vodafone took its 40% stake in Safaricom back in 2000 - via a local subsidiary, Vodafone Kenya Ltd (VKL) - the company granted an option to a company known as Mobitelea Ventures for 25% of VKL. Mobitelea exercised the option the following year, giving the company an effective 10% stake in Safaricom, and reducing Vodafone's effective stake to 30%.

It then seems that Vodafone brought back half of Mobitelea's stake at the beginning of 2003, giving Mobitelea an effective 5% stake in the company - and Vodafone 35% of Safaricom. Mobitelea is registered in the offshore tax haven of Guernsey.

Following a stock market floatation last year, the Kenyan government owns 35% of Safaricom, 25% is floated on the stock exchange and Vodafone Kenya owns the remaining 40%. Vodafone PLC claims a 35% "economic interest" in Safaricom, though its 87.5% stake in Vodafone Kenya - which in turn owns 40% of Safaricom.

The transaction does not answer questions as to who were the ultimate owners of the shares and why Vodafone entered into a deal with the mystery company in the first place.

Who Owns Mobitelea

The reports that Vodafone has bought out shares of the secretive Safaricom shareholder might come as a relief, especially for the buyer. At the beginning of the decade, Mobitelea indirectly took 10 per cent of Safaricom through a company called Vodafone Kenya, with the balance going to Vodafone of UK. Having earlier disposed of half of its shares, it has finally sold the remaining 5 per cent.

Vodafone will be relieved as Mobitelea, at least in the public eye, has come to represent the worst of the Moi era's sneaky deal-making. Needless to say, that has not left the London Stock Exchange firm looking good.

But what should be of more concern is that Mobitelea has quietly exited — after cashing in what could be billions of shillings — before anyone could get to the bottom of the matter.

Questions persist: How did the Mobitelea owners acquire their shares? How much did they pay? Why has Vodafone declined to reveal their names? Did the UK firm act in the public interest? What did the public gain from the transaction involving a parastatal?