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Private Equity Bids for Telecom Companies: A New Trend?
The concept of private equity bids for telecom companies seems to be picking up momentum, with more buyouts happening in Europe. With 30-per-cent returns, PricewaterhouseCoopers predicted that even the largest national telecom companies would not be immune from the private equity firms. Even BT and Vodafone are considered targets.
In Canada, BCE (the parent of Bell Canada) is talking about going private with three Canadian pension funds and Kohlberg Kravis Roberts (KKR), the private equity group. BCE has a market value of $27.54 billion, and a buyout would be the largest ever attempted in Canada, as it could cost about $45 billion.
The fact BCE is a private equity target for Kohlberg Kravis Roberts is no surprise, as KKR pursued TDC, Denmark's dominant telecom company, soon after setting up office in France. KKR and its partners (Apax Partners, Blackstone Group, Permira and Providence Equity Partners) paid $12-billion (USD) for TDC, a wireless and high-speed Internet company. TDC shares rose 39 percent as a result. (For BCE, shares rose $2.34 Canadian, or 6 percent, to $38.60 Canadian a share).
Some believe that phone-company leveraged buyouts will become a global trend, as KKR’s success and that of Swisscom, which paid more than 5 billion for FastWeb, the Italian broadband company with a million broadband and Internet customers. And, while it dropped its bid because Italian politicians favor domestic solutions over one from an American company, AT&T tried to buy a one-third stake in the company Olimpia, which controls Telecom Italia.
The increasing power of pension groups will also make buyouts more prevalent in the year to come.
Comments and feedback welcome, please email Jill Morgan at jmorgan@billingworld.com.
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