Barcelona - Telecom executives from Vodafone Group to Deutsche Telekom and Telefonica are meeting at the industry’s annual get-together in Barcelona from today, with more on their minds than the latest handsets.
Deals under consideration at the highest levels could realign the industry on a global scale, and executives like Deutsche Telekom chief executive Tim Hoettges and Vodafone’s Vittorio Colao who are attending Mobile World Congress carry the weight of decisions that will shape their companies for years to come.
At the annual meeting known mainly for gadget releases, Hoettges may run into SoftBank Group founder Masayoshi Son, who’s open to handing control of US carrier Sprint Corporation to the Germans in a deal that would upend the US telecom market.
Vodafone’s Colao is working on a fix for an Indian operation that has lost billions, while navigating the next step in a mobile-to-cable alliance with Liberty Global - whose chief executive Mike Fries will also attend. French consolidation may be taken up again later this year, and Spain’s Telefonica is still looking to extract cash from its O2 unit in the UK.
M&A activity
“We expect healthy merger and acquisition (M&A) activity in 2017,” said Joachim Sonne, who co-heads the telecom, media and technology investment banking unit in Europe, the Middle East and Africa at JPMorgan Chase.
After falling for two years, the value of telecom-industry deals announced globally in 2016 rose 34percent to $266billion (R3.44trillion), according to data.
Lower gross domestic product growth is forcing the carriers to find new ways to drive revenue and earnings, Sonne said. Pressure to consolidate is mounting as companies have access to cash and attractive financing, he said, while financial buyers display a growing appetite and activist investors stir the pot.
In the US, where phone carriers have tried to merge with content players, deal making may be aided by looser regulation under president Donald Trump.
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In Europe, authorities have suggested they’re willing to allow mergers that increase competition or better position the region’s companies against larger rivals from the US and Asia.
“What held back M&A in the US was the Obama administration,” said Roger Entner, an analyst at Recon Analytics. “The US still sets the tone when it comes to M&A, and a more lenient administration will likely influence the rest of the world.”
Maverick
At the forefront of US speculation is Deutsche Telekom’s T-Mobile US unit, led by maverick chief executive John Legere.
When Sprint’s attempt to buy the asset was derailed in 2014, T-Mobile was behind in subscribers, sales and market value. It’s now worth $52bn - 41percent more than Sprint - and has grown rapidly with products like free video streaming and unlimited data plans for consumers hooked on YouTube or Netflix.
SoftBank is open to all options, including a partial or full sale of its 83percent Sprint stake to T-Mobile, according to a person familiar with the matter. Talks with Deutsche Telekom are expected to start after a US spectrum auction ends in April, the person said.
Deutsche Telekom declined to comment. A SoftBank official wasn’t immediately available to comment on its stance, which was reported earlier.
At UK-based Vodafone, Colao has decisions to make on at least two fronts. The company is in discussions to merge its Indian unit with Idea Cellular, a deal that would create the country’s largest mobile-phone company and bolster a business Vodafone wrote down by more than $5bn last year.