US operator AT&T is assessing M&A possibilities in Europe and considering a tower sale that could raise as much as US$5bn.
At an analyst event in New York yesterday the incumbent’s management indicated that it regards Europe as an attractive market…
US operator AT&T is assessing M&A possibilities in Europe and considering a tower sale that could raise as much as US$5bn.
At an analyst event in New York yesterday the incumbent’s management indicated that it regards Europe as an attractive market for acquisitions.
The telco believes that Europe is likely to follow the US in terms of smartphone uptake and data usage, and that ARPU has potential to rise, New Street Research said.
AT&T is not focused on purchasing a quad-play operator, the analyst said in a note, as it believes that investment in US networks has meant that wireless has become something of a substitute for fixed voice and internet services.
Meanwhile Wells Fargo analyst Jennifer Fritzsche commented: “AT&T reiterated its view that mobile broadband is in early stages in Europe and it would like to participate in mobile broadband growth through owning assets.”
She said AT&T noted the biggest obstacle to a deal was finding the right asset and valuation. “The company is clearly very interested in a potential opportunity,” Fritzsche said.
Vodafone thought a good fit
New Street felt that one asset stood out as a potential acquisition for the incumbent: “The most obvious assets that would seem to fit the bill are Vodafone’s non-US assets.” The research firm pointed to the lack of alternatives which offer the scale and market position it thought the Dallas-based operator would want.
Verizon Communications has repeatedly said it would like to buy Vodafone’s 45% stake in their US joint venture Verizon Wireless – there is no consensus for the value of the UK telco’s shares and estimates range from US$100bn to US$140bn. Analysts have wondered what Vodafone’s business might look like minus its position in Verizon Wireless, considered an exceptional performer. Bernstein Research has noted that Vodafone is reliant on Verizon Wireless distributions to pay its ordinary dividend.
In early April a report in the Financial Times suggested AT&T and Verizon were partnering to buy Vodafone – with Verizon acquiring the rest of Verizon Wireless and AT&T taking on its European assets – which caused the target’s share price to rocket. The following day Verizon said it did not intend to bid for Vodafone “whether alone or in conjunction with others” – that precludes it from offering to buy the UK group for six months but does not stop it acquiring the 45% JV stake.
In January AT&T was reported to be looking at purchases in Europe and KPN and EE were pinned as potential buys. The incumbent’s CEO Randall Stephenson has previously said it is “inevitable” that the operator will look to make acquisitions overseas.
Tower sale more likely
New Street also said it believed AT&T is now thinking more seriously about selling towers. It said that the telco’s management seemed worried that rates on sites would continue to rise, therefore worsening a potential sale of the assets further down the line.
“We estimate potential proceeds of US$4bn to US$5bn which would likely be used for share repurchases,” the analysts said.
