Mannesmann's Orange Takeover Talks Put Pressure on European Telecom Rivals
By Kate Norton
(Adds forecasts for mobile market growth in 5th paragraph.)
London, Oct. 19 (Bloomberg) -- Mannesmann AG's talks to buy
Orange Plc raise the stakes in the contest to dominate Europe's
mobile phone market, putting pressure on Vodafone AirTouch Plc
and others to expand, analysts said.
A successful bid for the U.K. wireless company would make
Mannesmann, which already owns two of Europe's three biggest
mobile networks, a strong presence in the three largest European
phone markets.
Vodafone, Deutsche Telekom AG, and France Telecom SA and
have already made wireless purchases this year and they're
likely to keep buying, analysts said. None can afford to fall
behind in one of Europe fastest growing markets.
A Mannesmann bid for Orange ``won't be the last,' said
Adrian Taylor, who helps manage 10 billion pounds ($16.7
billion) at Capel Cure Sharp in Birmingham. ``The national phone
carriers are going to have to consider more expansion.'
More than 50 percent of the European population is
expected to have a mobile phone by the end of 2001, according to
Salomon Smith Barney estimates. That's up from 24 percent at the
end of last year.
Europe's mobile phone market is ideal for mergers and
acquisitions, say analysts, because a common digital standard
across the continent makes it easier for companies to integrate
businesses and generate cost savings on products. In the U.S.,
by contrast, there are several digital technologies.
Trouble is, there are few independent mobile operators
available to be bought in Europe. Orange, 44.8-percent owned by
Hong Kong's Hutchison Whampoa Ltd., is one of a handful of
mobile phone companies not linked with a traditional voice
carrier, and it's vulnerability as a bid target has helped its
shares more than double since the beginning of the year.
With few independent mobile operators on offer,
Mannesmann's rivals will seek out alliances and look to increase
stakes in the wireless assets they hold across Europe to grab a
larger slice of the region's mobile market, analysts said.
Deutsche Telekom, which bought U.K. mobile operator One 2
One Ltd. in August, and British Telecommunications Plc are among
the former monopolies that have said they'll boost stakes in
their European mobile operations when the opportunity arises.
Telecom Italia SpA Chief Executive Roberto Colaninno said
last week the company's mobile business, Europe's largest, will
seek to expand in Europe and is scouting possibilities for
international alliances, though it had no concrete plans.
The Vodafone Factor
Analysts said they'll also be keeping their eyes on
Vodafone AirTouch, the world's largest mobile phone company and
minority shareholder in Mannesmann's Mobilfunk unit, Germany's
No. 1 mobile phone operator.
Though Vodafone's European network stretches from Sweden to
Greece, it wouldn't be able to match Mannesmann's hold on the
top three markets if the German company gains Orange, analysts
said. That could prompt Vodafone to strengthen its holdings
across Europe by making a pitch for its German partner,
preempting Mannesmann's Orange bid.
Mannesmann would be too big for Vodafone to swallow once
the German company buys Orange, so the world's largest wireless
company would have to act quickly.
``Mannesmann would fit well with Vodafone,' giving the
U.K. company a stronger position in Germany, Italy and France,
said Thilo Kusch, an analyst at Dresdner Kleinwort Benson.
``The question is, will the Orange bid be the trigger for
Vodafone to act?' he asked.
Vodafone declined to comment. Bankers said a bid for
Mannesmann would prove difficult in a country where hostile
takeovers are rare.
Among other possible moves, BT could seek to gain full
control of Viag Interkom, its German phone venture with utility
Viag AG and Norway's Telenor A/S, analysts said. Viag is in the
process of merging with rival Veba AG, prompting analysts to
speculate it will shed its phone operations. The utility has
said it's planning to sell shares in the venture in 2001, part
of a sale of assets unrelated to its energy and chemicals
operations.
Bouygues Telecom
Veba, which yesterday sold its stake in German mobile phone
operator E-Plus to France Telecom, could also sell its minority
stake in France's Bouygues Telecom as it prepares for its merger
with Viag, analysts said.
Deutsche Telekom, Telecom Italia and Spain's Telefonica SA
could be interested in Bouygues Telecom, analysts said, though
controlling shareholder Bouygues SA has also expressed an
interest in raising its stake if Veba and other partners want to
sell.
Shares of other phone companies rose amid speculation that
they'll be too small to go it alone as consolidation in Europe's
phone market accelerates. Shares of U.K.-based Colt Plc, which
is linking its city rings in Europe with a fast data network,
rose 79 pence, or 5 percent, to 1,600 pence. Energis Plc added
56 pence, or 3 percent, to 1,725p. Equant NV, operator of the
world's largest data-communications network, rose 3 euros, or
3.8 percent, to 83.05. |
