First Data Says Its Intl Efforts Are Bearing Fruit
By HEATHER DRAPER
June 20, 2005 4:12 p.m.
Of DOW JONES NEWSWIRES
DENVER -- First Data Corp.'s (FDC) signing of three deals in Europe at about the same time earlier this month was a coincidence, but was also indicative of the company's concerted effort to grow globally, says First Data's international president.
On June 9, First Data said it had signed a merchant alliance agreement with International Card Services (ICS), a leading Dutch credit-card issuer. Later that day, the payments vendor struck a deal to acquire Europrocessing International, a card processor in central and eastern Europe. Four days later, First Data agreed to a joint venture with Banca Nazionale del Lavoro (BNL.MI), one of the largest banking groups in Italy.
"You shouldn't read too much into them all hitting at the same time," Pamela Patsley, president of First Data International, told Dow Jones Newswires. "It was coincidental. And we have similar initiatives in other regions."
Patsley said the deals were the culmination of months, even years, of hard work.
Patsley said First Data's international thrust began in earnest three years ago, when Chief Executive Charlie Fote, Patsley and other executives decided "we needed to get aggressive with growing our non-Western Union business."
Since 2002, Denver-based First Data has had "a very, very targeted focus on growing the [non-Western Union] part of our business outside the U.S.," she said.
First Data divides itself into three main segments: payments, which is mainly its Western Union Financial Services business; merchant services; and card-issuing services. The company's products and services include credit- and debit-card payment processing, ATM networking, electronic fund transfers, and credit-card issuer services for financial institutions and consumers.
First Data International, with its revenue divided between the merchant and card-services segments, now has clients in more than 70 countries and reported about 40% revenue growth in 2004 from 2003. Fote said the company expects 30% to 35% annual revenue growth in its international operations for the next few years.
Patsley said First Data International's growth strategy is three-pronged: growing organically, expanding its products and services, and making strategic acquisitions.
The three deals in Europe this month were relatively small for a company the size of First Data, which reported revenue of more than $10 billion in 2004, but they were incrementally positive for the company, said analyst Larry Berlin of First Analysis Securities Corp.
"I think it was a pretty good thing for First Data overall," Berlin said, noting that European markets are just starting to embrace non-cash transactions, so the prospects for growth there are enormous.
"About 82% of transactions in the European Union are cash transactions, so you can see where the opportunities are," he said.
Stifel, Nicolaus & Co. analyst Don McArthur called First Data's deal to acquire EuroProcessing International a "nice, tuck-in deal" that could help boost First Data's presence in eastern Europe.
"We believe this acquisition fits within First Data's goal of expanding into attractive international arenas and could potentially provide a springboard for further deals in the region," McArthur wrote in a June 10 note.
Credit-card usage in eastern Europe and the Baltic states is growing at about 20% to 30% a year, he said, more than double the growth in mature markets like the U.S., which sees card-usage growth of about 10% a year.
First Data's Patsley said electronic payments are just starting to catch on in many parts of the world, and First Data is making some of the sector's first inroads in many of those markets, including China.
In March 2004, China approved First Data to be the country's first third-party card and merchant transactions processor. According to the deal with China Everbright Bank (CVER.YY), First Data will process 11 million cards, mostly debit cards, and transactions from 2,000 merchant locations.
Similar opportunities exist in India, Latin America and other regions, Patsley said.
"We have such an emerging presence in so many markets, it's hard to say where there isn't a strong growth opportunity," she said.
First Data has more than 30,000 employees globally, about 5,500 of them in the international division.
First Data shares closed Monday up 19 cents, or 0.5%, at $40.54. The shares have traded in a 52-week range of $36.50 to $44.90.
None of the analysts mentioned owns shares of First Data. Stifel Nicolaus intends to seek compensation for investment-banking services from First Data in the next three months |
