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Backoffice & OSS
Swisscom Eying TDC?
Swiss Incumbent Seeks External Growth
by Ouida Taaffe
We have a little list on which we note possible buying
opportunities," the CEO of Swisscom, Jens Alder, told the
Handelsblatt, the German business daily on Monday, in
response to questions about the Swiss incumbent’s
acquisition strategy. Alder refused to be drawn on what names
might be on that list, but rumour has it that TDC (formerly
known as TeleDanmark) is one of them.
“The Wall Street Journal” had recently reported that Swisscom
had hired advisers on a potential acquisition of TDC. It also
said that a group of private equity investors including Apax
Partners, Blackstone Group, Kohlberg Kravis Roberts & Co.,
Permira Advisors and Providence Equity Partners were to
make a bid of around US$12 bn for the Danish incumbent.
This is not necessarily too hefty a price tag for Swisscom to
meet. It currently has around CHF2.39 bn (US$1.8 bn) in ‘net
funds’ and it is comparable in terms of revenue to TDC.
Further, Swisscom has a strong incentive to find a good
acquisition target and TDC is one of the few European
incumbents that might be both a manageable acquisition size
and offer more than a shrinking home market.
TDC had net revenues of DKK10.77 bn (US$1.73 bn) in Q2,
2005, up 8.5 per cent year-on-year. Its outlook for the whole
of 2005 anticipates net revenues of DKK46.9 bn (US$7.5 bn),
a 7.6 per cent year-on-year increase. TDC’s portfolio includes
operations in Switzerland (which would probably need to be
divested in the case of a Swisscom take-over), the Nordics,
Lithuania and Germany as well as a cable business in
Denmark.
In the first six months of 2005, Swisscom’s net revenues fell
by 1.7 per cent year-on-year to CHF4.912 bn (US$3.78 bn).
(Within this, revenues at the Fixnet division contracted by 4.5
per cent year-on-year, while those at Swisscom Mobile were
down by 1.8 per cent.) For the full year, Swisscom expects
revenues of CHF9.6 bn (US$7.42 bn) (down around 4 per cent
on the CHF10.0 bn of 2004) partly “as a result of keen
competition and price pressure on Swisscom Mobile and
Fixnet”.
The pressure on Swisscom is caused by both the narrowness
and by the increasing heat of its home market. For example,
the two-largest retail chains in the country recently launched
MVNOs - (Read more) and others are rumoured set to follow. Though
Swisscom Mobile, the incumbent’s mobile business, had
around 61 per cent market share in 2004 (according to the
regulator), stiff competition from retail players who are used
to wafer-thin margins mean that this cosy set-up is unlikely to
continue.
Swisscom has already made abortive attempts to acquire
Cesky Telekom and its neighbour Telekom Austria. Alder
indicated that Swisscom would not renew its interest in
Telekom Austria, should the Austrian incumbent be privatised
next year. Alder is reported as saying that he did not think
that Austrian politicians could bring themselves to sell the
state operator to non-Austrians.
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