Lex: Infostrada
Published: September 28 2000 20:19GMT | Last Updated: September 28 2000 20:24GMT
Cash is king in today's telecommunications industry. If Vodafone can get Enel - alone or with France Telecom - to pay E12bn (£7.2bn) in cash and loan notes for Infostrada, shareholders should be delighted. The money will go a long way towards repairing a balance sheet stretched by third generation mobile licence fees. Factoring in other disposals, Vodafone should end the financial year with less than E15bn debt, a manageable level.
Enel should have struck a harder bargain. As it is, France Telecom, the minority partner in Enel's Wind consortium, will struggle to justify putting up its share of the cash. There are synergies to be had. Wind and Infostrada combined would have 10 per cent of Italy's fixed line telecoms market, a much bigger share of the business market, and fractionally more internet subscribers than Telecom Italia. This would be a strong platform for a third generation mobile licence bid. With Enel's deep pockets and 29m customers behind it, Wind/Infostrada would have sufficient bulk to challenge TI across the board.
But does Enel - the majority state-owned former electricity monopoly - have what it takes to succeed in new generation telecoms? Other utilities brand telecoms services, but owning and operating them is another matter. Enel's interest in telecoms probably reflects its lack of progress constructing a more conventional multi-utility business, for instance in water. Franco Tato, Enel chief executive, is building an empire with more than an echo of Iri, the old state holding company. Investors should watch from the sidelinexs. |
