After Ono and SFR, what further deals are just around the corner?

It's been some week in the European telecoms market as mobile operators scramble to consolidate, and in the process buy up fixed assets to shore up their mobile businesses. Unified services, convergence and quad-play are the latest buzzwords, even if it's not always clear what these terms mean.

In Spain, Vodafone finally announced it had reached an agreement to buy Ono, ending increasingly frenzied speculation and the Spanish broadband operator's plan to pursue an initial public listing.

But the ink had barely dried on Vittorio Colao's signature before media and analysts moved onto the next possible deal that the mobile, and increasingly fixed, giant might make. Already market observers have homed in on Italy and the UK, the next obvious markets for Vodafone to boost its fixed assets. Indeed, Wind's Infostrada is being hauled up as a possible contender, although generally speaking options are thin on the ground.

Italy is an important market for Vodafone--its third largest by sales after Germany and the UK. However, Bloomberg notes that it's also the group's worst performer, after reporting a 17 per cent decline in service revenue and losses in mobile subscribers for the last quarter. As things stand, Vodafone is adopting a do-it-yourself approach to building fixed assets in Italy. Indeed it is far from certain that the operator would look to buy a fixed operator from the limited options available.

In the UK, some regard BSkyB as a possible Vodafone target. Even BT is being tossed around as an option, in what would be a fairly mind-boggling prospect for the UK market.

Meanwhile over in France the market has been spellbound by recent events: Vivendi revealed a preference for Altice after assessing the bids it received for SFR, and in the process managed to snub French politicians and France's business establishment in one fell swoop. The company even managed to upset Xavier Niel, until recently regarded as the market's upstart entrepreneur who turned the mobile market on its head in 2012. Now, after joining forces with Bouygues to fend off the Altice bid for SFR, Niel seems almost part of the establishment himself: the new upstart is Patrick Drahi, the founder of Altice who is extremely experienced in M&A. Drahi also does not live in France, which has proved to be a further irritant for French politicians.

Assuming Drahi carries off his plan to merge SFR with Numericable and create a new fixed and mobile powerhouse in France, questions will be asked about the future of Bouygues Telecom, which really does need to boost its position in France after being hard hit by Free Mobile's mobile pricing. Indeed it's already speculated that Iliad and Bouygues Telecom will merge no matter what, in something of an ironic twist of fate.

"It seems likely that one way or another Iliad and Bouygues will end up in each others' arms," Bernstein analyst Claudio Aspesi wrote in a research note.

Bouygues Telecom is very much part of the establishment; indeed, Martin Bouygues, the son of company founder Francis Bouygues and current CEO of the group, would find it hard to countenance a failure of the telecoms company.

It's a matter of family pride, a leading executive from within France's telecoms industry recently said: the move into mobile was Martin Bouygues' adventure after his father's death in 1993.--Anne

 

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