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5 July 2012

Consolidation in the telecommunications market

As expected, the telecommunications market will continue to consolidate. The most recent major acquisitions that are having an impact on the market are Cable&Wireless, KPN and Telekom Austria. Vodafone has prevailed in the bidding war for Cable&Wireless. Now Vodafone has to cope with a difficult task. The consolidation of their own European sales structures could not be completed on schedule and now they must also integrate Cable&Wireless. In addition, Vodafone must continue to buy into the fixed network area. Soon you will no longer be able to only sell mobile communications. The integration of mobile and fixed networks into one product group is rapidly progressing. This is clearly visible in both the retail and enterprise markets. VoIP solutions with mobile integration is creating hype with customers and companies alike. The integration of services also extends to traditional segments. Managed Voice without tariffs for airtime is an increasingly difficult sell. Service Providers that have no pricing centre for the purchase of carrier services will not have a chance against telecommunications companies that offer total packages.

Vodafone and Tata Communications, who both came out with empty hands in the Cable&Wireless deal, continue to look to Europe for takeover candidates. There are enough prospective buyers, but meaningful takeover candidates are hard to find. America Movil bought Telekom Austria and has acquired a hostile controlling stake of almost 28% of KPN. KPN had previously no dominant investor, so that the 28% might already be a majority vote. Therefore, Advanced Information assumes that Carlos Slim's buying spree is not over in Europe. Might an acquisition in Germany make even more sense now? The German Telekom is a suitable takeover candidate. America Movil is the leading telecommunications company in Latin America, ahead of Telefonica. AT&T has also optimized their balance sheets for a large purchase. However, it is unclear whether this will be a European or Asian company.

Alongside the Deutsche Telekom, BT is also certainly in an inferior position. On the other hand NTT is strengthening their position in Western Europe. Because there are more prospective buyers than meaningful takeover candidates, companies are playing for keeps. There can be no other explanation for the attack by analysts on Telefonica's assets. From the perspective of Advanced Information analysts, Telefonica is not a suitable takeover candidate. The Latin American business can offset the problems in the Spanish domestic market. France Telecom has also been able to fulfil expectations. That's not to be taken for granted! The prices in the French mobile communications market have fallen sharply by 40% in the first quarter. 2.4 million customers have switched to Iliad, the new provider.