Telecoms M&A driven by infrastructure sharing

A new survey has revealed the state of M&A activity in the telecoms sector over the last quarter.

Law firm Allen & Overy, who authored the report, described the last three months as being a period of cautious growth for telecom, media and technology companies.

The TMT industry saw 57 deals worth €44.3 billion in Q3. This compares to 76 deals worth €36.2 billion over the same period last year and 97 deals worth €64.7 billion in Q2 2011.

So although the number of deals in currently down, A&O said their value has increased by 21 percent in the first nine months of this year.

Infrastructure sharing was said to be driving deals in telecoms specifically, as competition and pricing pressures force operators to look at ways to reduce overall costs.

“Mobile carriers are selling tower portfolios to specialist tower operators or forming joint ventures with other carriers to share tower infrastructure,” the report noted.

The bulk of deals – 51 percent of total deal volume and 60 percent of total deal value – involved US companies. The report highlighted the Google/Motorola and HP/Autonomy deals as being the biggest.

In Western Europe, A&O said the situation was a waiting game. “In general, deals are taking longer to complete, being put on hold or falling through as buyers and sellers fail to agree a price,” the report explained.

The hold up in Deutsche Telekom’s proposed sale of its T-Mobile USA arm to AT&T is a classic example of this. Unsurprisingly, the Eurozone’s financial crisis was blamed for the overall situation.

A similar scenario is being played out in Central and Eastern Europe where activity was said to be fairly slow.

However, the report noted that “ a lot of activity” was being generated as a result of telecoms and media companies gradually merging. This is prompting private equity firms in particular to sell of assets they bought in the last five years whose financing is coming up for renewal.

“Business leaders are still focusing on growth, despite continued market volatility,” concluded A&O’s Gary McLean. “Almost half of those surveyed (44%) are expecting to use M&A to deliver at least part of their growth plans, while 65% will rely on organic growth to fuel some of their expansion – just 17% plan to consolidate their current position.”

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