March 25, 2023

Telecoms Merger in Austria Could Open Door to Further Consolidation

But for years, the telecommunications landscape has remained largely unchanged, with three or four operators still fighting winnowing, zero-sum battles to steal customers from one another in saturated national markets.

This month, the European competition commissioner, Joaquín Almunia, is expected to approve a combination of two mobile carriers in Austria, 3Austria and Orange Austria, reducing the number of network operators in that country to three. But it could also set a precedent that makes other telecommunications takeovers easier, said Beranger Guille, an editor in London at Mergermarket, an information service covering mergers and acquisitions.

Mr. Almunia exacted some concessions, but they were not as large as those demanded by national regulators in recent merger talks that ultimately fell through. While the deal now meets the competition requirements of the Austrian regulator, BWB, it also furthers the European Commission’s goal of encouraging the creation of regional telecommunications groups that can offer state-of-the-art wireless service across the single market of the European Union’s 27 members.

“We are not necessarily expecting a flood of M.A. to occur if the Austrian purchase is approved,” Mr. Guille said, referring to mergers and acquisitions. “But it could mean one less obstacle.”

The creation of regional operators that can sell cross-border service simultaneously within several E.U. countries could bolster competition in individual countries and, at least theoretically, lead to lower prices for consumers. Currently, operators are required by E.U. and national laws to treat each national market as a distinct entity, contributing to limits on domestic retail opportunities and the rise of an oligopolistic status quo in some countries.

A new level of regional competition in the industry could lead to more vigorous direct competition between Telefónica of Spain, Vodafone of Britain, Deutsche Telekom and Orange of France, the big operators that until now have mainly avoided the home markets of their peers. If mergers were easier to pursue, Orange and the T-Mobile subsidiary of Deutsche Telekom, which have steered clear of each other’s domestic markets, could theoretically go head to head in France and Germany.

Maritheres Paul, a spokeswoman for 3Austria, said the company was optimistic that Mr. Almunia would approve the takeover of Orange Austria, which was announced in February.

“We’ve been negotiating with the E.U. for nearly a year now,” Ms. Paul said. “We think that we have met everyone’s concerns and are hopeful for a positive decision.”

Mr. Almunia took up the Austrian case at the request of that country’s regulator, which had initially voiced concerns about losing a mobile network through the combination. Antoine Colombani, a spokesman for Mr. Almunia, declined to comment on the case.

Mergermarket says that the level of merger activity in the European telecommunications sector has fallen for two consecutive years amid the global economic slowdown and the financial difficulties of Southern Europe.

The volume of mergers and acquisitions in the sector has fallen to €16.3 billion, or $21.1 billion, so far in 2012, less than half the €35.4 billion in 2010 and down 59 percent from a peak of €39.7 billion in 2007 before the financial crisis took hold, according to Mergermarket.

Over the past decade, the European telecommunications sector has been largely devoid of big acquisitions that defined the early phase of the industry. But the economic downturn has led operators to pursue a series of smaller mergers and network-sharing arrangements.

Article source:

Deal Professor: Why MetroPCS Is Truly in Play

A MetroPCS store in Manhattan.Mary Altaffer/Associated PressA MetroPCS store in Manhattan.

There are three fundamental things to know about the deal between MetroPCS and T-Mobile USA.

First, this is really just an acquisition of MetroPCS by Deutsche Telekom. After the transaction is completed, Deutsche Telekom, the German telecommunications behemoth, will own 74 percent of the combined company, which will be renamed T-Mobile. MetroPCS’s public shareholders will own the rest.

Second, though Deutsche Telekom is acquiring MetroPCS, this is also a way for Deutsche Telekom to undertake a reverse initial public offering for T-Mobile. Deutsche Telekom may be acquiring control of the combined MetroPCS and T-Mobile, but it wants to exit this business eventually. If the transaction goes through, expect Deutsche Telekom to sell those shares to the public over time.

Deal Professor
View all posts

Third, because this is really an acquisition, it puts MetroPCS, one of the few national mobile carriers, very much in play.

The deal structure is not that of a typical merger where a buyer simply acquires the target. It is instead a recapitalization. A recapitalization is a fancy term that means the rejiggering of a company’s capital structure.

The restructuring part is Deutsche Telekom’s contribution of the T-Mobile business to MetroPCS in exchange for 74 percent of the share capital of the combined business. And because this is categorized as a recapitalization, the contribution of the shares is tax free to Deutsche Telekom.

T-Mobile's deal to buy MetroPCS turns up the pressure on Sprint Nextel.Stephan Savoia/Associated PressT-Mobile’s deal to buy MetroPCS turns up the pressure on Sprint Nextel.

The net effect is that Deutsche Telekom is acquiring control of MetroPCS.

But don’t expect Deutsche Telekom to hold on to the shares for long. As Rene Obermann, the company’s chief executive, acknowledged on an investor call, this is also a way for Deutsche Telekom to gain liquidity for its T-Mobile interest. Mr. Obermann called the transaction a “turbo I.P.O.” By doing it this way, Deutsche Telekom saves on I.P.O. costs, and also has an asset that is more easy to sell since it has greater scale.

There are also some bells and whistles on the transaction. There is a $1.5 billion dividend to MetroPCS shareholders to give them an incentive to vote for the share issuance to T-Mobile. There is also a 2-for-1 reverse stock split of MetroPCS shares. The parties didn’t disclose why, but the reverse stock split is likely to push the MetroPCS stock price back above $10 after the large dividend and keep up appearances. The stock split also has the convenience of ensuring that MetroPCS has enough authorized shares to issue to Deutsche Telekom.

MetroPCS will also restructure its debt, and Deutsche Telekom has committed to lending the new entity as much as $6 billion more in financing on top of the $15 billion the combined entity will owe Deutsche Telekom.

But it is the structure of the transaction that puts MetroPCS up for sale.

Under Delaware law, the deal is viewed as a sale because Deutsche Telekom is obtaining majority control of MetroPCS. This puts the MetroPCS board into “Revlon-land” (referring to a 1985 Delaware decision in a takeover battle over Revlon), requiring the board to obtain the highest price reasonably available for the sale of the company.

This is an open invitation for another bidder to come in and pay a higher amount, something the MetroPCS board must accept if it a clearly superior offer.

Deutsche Telekom’s main fear here is likely to be a move by Sprint. Earlier this year, MetroPCS had previously thought it had a deal with Sprint, but the Sprint board pulled out at the last minute.

MetroPCS is reported to be — surprise! — not unhappy that this new deal may spur Sprint to come to the table. And because Revlon duties apply, MetroPCS’s board is now bound to take the highest price reasonably available. If MetroPCS takes this offer, it must pay a $150 million termination fee to Deutsche Telekom.

Notably, Deutsche Telekom tried to deal with this issue by putting a “force the vote” provision in the transaction agreement. MetroPCS cannot terminate this deal even if a competing bid is made unless the company holds its shareholder vote and shareholders vote no. Before then, only Deutsche Telekom can terminate the deal even if MetroPCS’s board recommends a competing bid. And Deutsche Telekom will have five business days to match any competing bid before MetroPCS’s board can even make such recommendation change.

This will not deter a Sprint bid, but it will make it harder to complete and give Deutsche Telekom more time to respond to any competing bid.

Ultimately, the structure of the transaction was likely driven by the fact that Deutsche Telekom wanted liquidity but MetroPCS could not pay the cash necessary to acquire T-Mobile. The contribution is therefore a stepping stone to such liquidity, but Deutshe Telekom is now forced to accept this risk of a competing bid.

The next move is up to Sprint.

Either way, the real winners may be Deutsche Telekom’s lawyers and investment bankers. Their fees are likely to come out of the $3 billion in cash that ATT paid to Deutsche Telekom in connection with ATT’s thwarted attempt to purchase T-Mobile. And if this transaction also fails, these lawyers and bankers are also likely to be paid some part of their fees, leaving them teed up to take a run at a third transaction.

Steven M. Davidoff, writing as The Deal Professor, is a commentator for DealBook on the world of mergers and acquisitions.

Article source:

Seven Tech Trade-Offs Worth Making

The easy answer is “both.” But the reality is that most of us are usually dealing with a finite amount of money to spend, and that means making trade-offs. We want to get the most bang for our buck, not to be lured into paying for features and options that are not worth the money.

Below is some guidance about what is worth paying for, and what can be left unchecked on the options list.

PAY FOR PC MEMORY, NOT SPEED When buying and configuring a new computer, companies often give the option of upgrading the processor and adding more memory, or RAM. If it is an either/or proposition, go for the RAM. Processors are usually fast enough for most people; it is the RAM that can be the bottleneck.

Here’s a side note on RAM: Do not buy it from your manufacturer; RAM purchased from online retailers is just as good and considerably cheaper. Check out retailers like Crucial (for Windows machines) and Smalldog (for Macs). Each will tell you what kind of RAM you need for your machine, and they often sell it for more than half off the manufacturer’s retail price.

PAY FOR MESSAGING, NOT MINUTES Admittedly, this advice for cellphones applies best to a certain type of user — one who has a Monday to Friday, 9-to-5 office job. If this describes you, you are probably not using your cellphone all that much on weekdays. That leaves you with nights and weekends, when minutes are free. Look at your last bill and see how many minutes you actually used. You may be surprised to find that you are using many fewer minutes than you are paying for.

And what mobile carriers charge for individual text messages is ridiculous. If you have no bundled plan, each text sent or received can cost you as much as 20 cents. For an extra $5 or $10 a month, you can get hundreds or even thousands of texts included in your package. It is a far better price than going à la carte.

PAY FOR COMPONENTS, NOT CABLES Buy the finest displays, speakers and components you can afford for your media center. Be dazzled by a crisp, bright display. Feel as if you are in the middle of the action with the most powerful surround-sound systems. But when a salesperson starts pushing the A/V cables for $1,000 (this price is not an exaggeration; such cables exist), walk away.

Many connections today (H.D.M.I., optical audio) are digital, which means there is little to no signal degradation along the length of the cable. Small exceptions can be made if you are connecting components across long distances — say, more than 25 feet. Even with analog connections, it is highly likely that you will not be able to hear the difference between a cheap cable and an expensive one.

PAY FOR SENSOR SIZE, NOT MEGAPIXELS David Pogue, who writes the State of the Art column for The Times, has made this the camera shopper’s rallying cry for years. But it bears repeating because the industry still promotes one now-useless specification and obfuscates a far more important one. Just know this: Almost all cameras have enough megapixels now; it is the size of the image sensor that largely determines the quality of an image. Sensor size is confusing, because manufacturers use different formats. In response to ’a blog post from Mr. Pogue, someone created, a site that converts sensor measurements for an easy comparison.

PAY FOR SPEED, NOT CHANNELS For Internet access, most cable operators offer tiers of service, usually a broadband version of coach, business class and first class. The top tier is usually more than most people will ever need, but the base package may groan under the weight of heavy video streaming. Better to move up a tier, which should add about $10 to your monthly bill.

That way, you can cancel most of your movie channels and go with services like Netflix, Hulu Plus or Amazon Instant. Their costs are considerably less — either pay-per-video or less than $10 a month — than what you pay for Cinemax, TMC, Starz, Encore and other movie channels. (You may want to keep HBO or Showtime if you like those channels’ original programming — those shows will probably not be available anywhere else for a while.)

If you have a recent TV or Blu-ray player, you may already have access to Netflix and the other providers as built-in “widgets” that will connect through your home’s Internet connection. If not, $99 will get you an Apple TV or you can get a Roku box, which starts at $59; both will connect to streaming services. Over the course of a year, the cost of the hardware and services will be far less than the monthly fees you were paying the cable company.

PAY FOR APPLECARE, NOT MOBILEME Apparently, Apple makes some products that people really like. But Mobile Me, the company’s suite of cloud-based services, does not have the same draw. Maybe it is because most of what Mobile Me can do is available free from other companies. Web e-mail? Gmail. Photo storage? Flickr. Cloud storage? Dropbox. There used to be one killer app on MobileMe — Find My iPhone. But now that is available for free to all iPhone users, so that is one less reason to pay $99 a year for the service.

But saving on MobileMe frees up some cash for something more valuable, and that’s AppleCare, Apple’s extended hardware coverage and phone support. If you buy an Apple product without AppleCare, you get 90 days of free phone support and one year of hardware coverage (note that accidents like spills, drops and other mishaps are never covered, only malfunctioning equipment). If something goes wrong after that, you must pay for any phone support or repair work, and the prices are high — from $30 to $50. But purchase AppleCare (which costs from $29 for an Apple TV to $349 for larger MacBook Pros) and you get three years of phone support and repair coverage.

While other tech companies offer similar plans, most are to be avoided, as calling them for help often results in, “Did you try restarting your computer?” Apple’s techs are helpful and persistent and, since the company makes both the operating system and the hardware, they have the added benefit of actually knowing what they are talking about.

PAY FOR TV SIZE, NOT REFRESH RATE As Matt Buchanan pointed out in a still-useful post on a year and a half ago, every television manufacturer has a sweet spot when it comes to price and size. Going to 50 inches from 42, Mr. Buchanan explains, may cost you $200, but going 54 inches from 50 could cost $400 more, so 50 inches is where you would get the most for your dollar. Every manufacturer has its own sweet spot, so it pays to look at the lineup and see where it is.

But one thing you do not have to spend much time looking up is a television’s refresh rate, measured in hertz. That tells you how many times per second the TV refreshes the image on its display. A 60 Hz television refreshes its image 60 times a second; a 120 Hz does it 120 times a second. Many — if not most — TVs now have a refresh rate of 120 Hz, and more expensive models are faster than that, refreshing the image 240 times per second. And while twice as fast is theoretically better, your eyes would be hard pressed to tell the difference. That is not a tradeoff, that is a ripoff.

Article source: