Pipeline Publishing, Volume 7, Issue 5
This Month's Issue:
Wireless for Developing Markets
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NewsWatch: October — M&A and Other News
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By Phillip J. Britt

Telecom operators in the last month have initiated mergers/acquisitions or divestitures in order to more tightly focus their resources, according to Mike Sapien, principal analyst for Ovum.

Vodafone sold its 3.2 percent stake in China Unicom while placing remaining minority stakes within the company into two regional groups, European operations and non-European operations. The restructuring plan goes into effect Oct. 1.

“Vodafone is trying to focus its business and sell off its less strategic investments,” Sapien said. “They’re trying to get away from these scattered investments where they have little control. They have a strong base of customers in both wire and wireline services. They’re making the decision about what businesses to invest in and what to sell off. They’re trying to focus most of their business in Europe. Outside of Europe, most people don’t know much about Vodafone.”

Telecom operators in the last month have initiated mergers/acquisitions or divestitures in order to more tightly focus their resources.

percent. France Telecom, still 27 percent owned by the French Government, has been struggling as it transitions towards a private company.

But the business and work cultures in the two companies are too different for

Outside of Europe, Vodafone’s business is primarily in sub-Saharan Africa and India.

The same basic philosophy was behind the announced plan of Swisscom to purchase the 18 percent of Fastweb that it didn’t already own and to delist the security, according to Sapien.

“There’s a general trend to clean up the investment portfolio,” Sapien said. “Partial ownership tends to get discounted in the market. With growth rates a little above flat, it’s a good time to gain control of investments without overpaying.”

Sapien added that AT&T followed a similar principle when selling Sterling Commerce earlier this year. Minority investments are no longer seen as assets. Instead, firms are concentrating where they have the largest base of customers.

However, not all business combinations make sense. There had been rumors that France Telecom and Germany's Deutsche Telekom were looking to merge. The rumors had sprung up as a result of Deutsche Bank increasing its stake in France Telecom to over 5

a merger to make sense, according to Sapien. So he doesn’t think that the companies were trying to downplay rumors to keep word from getting out before a deal is consummated.

BT and Microsoft, on the other hand, have been working together for some time and that business partnership was strengthened this month when BT’s Onevoice service was qualified for Microsoft Office Communications Server 2007 R2.

Office Communications Server 2007 R2 users can now streamline communications by combining presence and instant messaging interoperability with BT Onevoice conferencing, and software-powered voice over IP in a single, unified platform globally.

“This has been a long time in coming,” Sapien said. “Now they’re finally doing something with Ribbit.”

BT acquired Ribbit, a platform for creating voice-based applications over the Internet nearly two years ago. BT can run those applications over its backbone network at a lower cost than Ribbit was able to lease those lines.

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