Iliad Set to Become Fourth Mobile-Network Operator in Italy
July 06 2016 - 3:50AM
Dow Jones News
France's Iliad SA has agreed to acquire the remedy package put
together by CK Hutchison Holdings Ltd. and VimpelCom Ltd. to
address regulatory concerns over the merger of their Italian
businesses.
Buying the assets would allow Iliad—controlled by French
billionaire Xavier Niel—to create a fourth mobile network in the
country with nationwide coverage.
"The agreement is a unique opportunity for the Iliad Group to
enter the Italian telecoms market," Iliad said, adding that its
plan is "to capitalize on the experience it has acquired in France
with the successful launch of a fourth mobile network operator in
2012."
Iliad, which beat a rival bid from another Italian operator,
Fastweb, owned by Swisscom, said it would spend €450 million on
frequencies, but didn't provide an overall value for the deal,
which also includes infrastructure assets.
CK Hutchison and VimpelCom last year agreed to form a new
equally owned joint venture that would house their two Italian
businesses and create a mobile operator in the country with more
than 31 million subscribers.
But the European Commission, the bloc's antitrust authority,
said it had concerns the deal could lead to increased prices and
reduced choice for customers in Italy and opened a formal probe
into the merger in March.
Margrethe Vestager, the European Union's antitrust chief, has
taken a tough line against telecom deals in the region,
particularly in cases where deals reduce the number of
mobile-telecom operators in a given country.
Telecommunications executives have long argued that mergers are
necessary to reduce competition and boost investment at a time when
consumers are using more data as they watch more videos on
smartphones.
Brussels has in recent months blocked other telecommunications
mergers after voicing similar concerns, including CK Hutchison
Holdings Ltd.'s planned multibillion-dollar acquisition of British
mobile operator O2.
In recent years, Italy's telecom sector has been one of the
hardest hit in Europe, suffering from harsh competition and
plummeting prices. Last year, Italian telecommunication companies
saw their revenue shrink 1.5% compared with 2014, according to the
country's regulator Agcom. Total revenue from the mobile segment
was also negative, down 0.6%, Agcom said.
Still, there are signs of a trend reversal in the mobile-telecom
segment, raising hopes of a recovery for some Italian players,
which may now be put at risk by Iliad's mobile deal in Italy,
analysts say.
Iliad entered the French market with cutthroat prices for
mobile-phone subscriptions for as little as €2—less than $3—a month
in 2012, forcing competitors to also cut their prices, and it
grabbed around 17% market share in four years.
Barclays analyst Daniel Morris said Iliad's entry into the
market would be a "negative development" for competitors including
Vodafone Group PLC and Telecom Italia.
Wind Telecomunicazioni SpA and H3G increased their market share
in the mobile sector respectively by 0.2% and 0.6% last year.
As a result, Wind's market share in 2015 grew to 20.7%, while
H3G reached 12%. Telecom Italia SpA saw its mobile market share
falling slightly to 32.2% last year, while Vodafone's Italian
branch lost a 0.9% to reach 31%.
People familiar with the matter have long said Iliad would
eventually want to go for another transformative deal, partly to
put its management team to work on another large-scale project,
after barnstorming France's mobile arena.
Iliad had looked into whether it could use the remedies from CK
Hutchison's planned $14 billion takeover of Telefonica SA's British
cellphone operator O2 to enter the U.K. market, people familiar
with the matter said, but the deal was torpedoed by the European
Commission in May. Iliad also made a failed attempt to acquire a
controlling stake in T-Mobile US Inc. in 2014.
Mr. Niel, who purchased options to buy a more than 10% stake in
Telecom Italia last year, said he now owns a stake valued at less
than €25 million in the former state monopoly, which he said he
would sell in the next few weeks.
Write to Nick Kostov at Nick.Kostov@wsj.com and Manuela Mesco at
manuela.mesco@wsj.com
(END) Dow Jones Newswires
July 06, 2016 03:35 ET (07:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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