Year in review 2011: European operators resize and refocus

The news: While the year opened quietly, the appointment of a new chairman at Vodafone that was skilled in transforming companies was an indication of what was to come. The hiring of Gerard Kleisterlee, the outgoing CEO of Philips, was welcomed by the stock market given his track record of simplifying the previously unwieldy Philips conglomerate.

In March, Russia's Vimpelcom pushed through a $30 billion merger with Wind Telecom to become the world's fifth-largest operator with 173 million customers. Analysts said the deal had strategic merit and would allow having Vimpelcom gain access to rapidly growing mobile operators in Africa, Asia and Italy.

Days later came the announcement AT&T planned acquire T-Mobile USA from Deutsche Telekom for $39 billion. If it has been consummated, the deal would have remade both AT&T and Deutsche Telekom by allowing AT&T to become the dominant player in the United States, and allowing Deutsche Telekom to focus on its core assets in Europe.As the year wore on though, regulatory hurdles, first from the US Department of Justice and then from the telecoms regulator, the FCC, kept cropping up. Earlier this week, AT&T pulled the plug on the deal, handing Deutsche Telekom $3 billion in cash and $3 billion in spectrum and roaming agreements.

A deal that went more smoothly was the sale in April of Vodafone's 44 per cent holding in SFR. Majority owner Vivendi had long coveted outright ownership of SFR, and Vodafone was able to extract €7.95 billion from the sale.

In the same month, both France Telecom Orange and KPN began making noises about acquisitions. FT Orange confirmed it would continue to look for expansion in the Middle East and Africa via two to three acquisitions per year--a target it failed to meet in 2011 perhaps due to political unrest in some regions.

KPN, meanwhile, said it would look to expand into Europe where governments were planning to sell state-run telecom assets, or where other large operators, such as seen with Vodafone, wanted to divest minority shareholdings. Nothing more cameof this in 2011, perhaps due to economic unrest in the region.

By July, FT Orange had put its Swiss, Austrian and Portuguese operations up for sale, claiming that it wasn't interested in operators where it didn't have majority control or where the subsidiary wasn't ranked among the top two mobile operators within that country. However, the company did register an interest in making acquisitions in Spain.

In the same month, Vodafone managed to quietly slip away from its 24 per cent holding in the Polish operator Polkomtel, scoring €896 million in the process.

in August, Telecom Italia was rumoured to be bidding for 3 Italia in a deal that valued the Hutchison-owned mobile operator at around €4.3 billion. But this rumour didn't last long, with Hutchison MD Canning Fok squashing any plan for a sale, saying in October: "This looks to me more like somebody's wish than the reality." Instead, Hutchison's Austrian subsidiary made a €1.4 billion bid to acquire Orange Austria in a deal that could be approved by late December or early 2012.

Why it was significant: The year was dominated by Deutsche Telekom's effort to remove itself from its troubled operations operations in the United States--a saga that came to a sticky end as the year drew to a close. Opposition from federal regulators there proved too difficult, delivering bad news for AT&T, though not quite as dire for Deutsche Telekom, which scored a $6 billion breakup fee. However, moves by Vodafone and FT Orange to divest themselves of minority holdings is an indication of a renewed focus on generating profits from businesses that are under their control, and it appears they are intent on selling off minority stakes in unappealing regions. KPN and Telefónica made the headlines by announcing M&A intentions--which proved nothing more than that. However, both companies now need to take action to rejuvenate their sagging fortunes--more so than ever before. The days when European operators roamed the globe opening subsidiaries or buying up local operators are long gone. The year demonstrated that breadth of operations is becoming less important, and control, focus and driving for profits are the watchwords entering 2012.

Year in review 2011: European operators resize and refocus