The protracted MTN-Bharti negotiations are over and done with. It’s a relief. On the surface, a tie-up between the big Indian and South African telecom firms made sense the way Daimler+Chrysler once did: Bring two mighty, complementary players together to create a ginormous entity with sparkling growth potential. MTN+Bharti would have instantly had 200 million subscribers and $20 billion in annual revenue with a vast span across continents and emerging markets. We all know how Daimler/Chrysler played out, leaving both firms in sorry shape, especially Chrysler. MTN-Bharti Airtel was heading in the same dubious direction, thanks largely to South African concerns about losing control of a national champion to a foreign buyer. As DJN colleague Robb Stewart recently wrote about the deal, which was scuttled Wednesday, “Cross-border telecommunications deals already have a poor history of success. Deals touted as mergers-of-equals tend to fare even worse.” You may recall that Daimler-Chrysler was also presented as a “merger of equals,” whereas reality soon proved otherwise. Ironically, over the years MTN itself benefited from the failure of a competitor to thrive amid convoluted ownership. As Robb wrote, “The companies may want to learn from Vodacom Group Ltd., a mobile venture that had been owned equally by South Africa’s Telkom SA ltd. and Vodafone Group PLC until the U.K. mobile giant bought control. Telkom managers have conceded that Vodacom was held back by its ownership structure and restrictions that prevented it from competing in marktes that were seen as belonging to Vodafone. The beneficiary of all this was MTN, which outgrew it.” Laissez-faire, anti-regulation types will wring their hands over the deal being effectively killed by politicians prioritizing South African corporate might over pan-markets industrial logic. I say: Don’t waste your time.
Telecommunications
India, Mergers & Acquisitions, Regulation, South Africa, Telecommunications / Comments Off
It’s one of those questions that pops into your head once a month (when the phone bills arrive): Why do I pay a flat rate for unlimited calling for my land-line phone service yet have to buy up to a limited number of minutes for my cell phone?
Sprint, the number three wireless carrier in the U.S., unveiled a new plan to try to grab customers from Verizon and AT&T that allows them to make unlimited phone calls for a flat fee. The new plan also allows for unlimited data – meaning text messaging, web browsing and other services.
Internet, Mergers & Acquisitions, Technology, Telecommunications / Comments Off
A group of investors agreed to buy a 65% stake in Skype today from eBay in a transaction that at first leaves you scratching your head. Here’s a unit of eBay that never seemed to fit and while business has been growing, its sales in the most recent second quarter were but $170 million. The value placed on Skype in this deal comes in around 15.71 times earnings (valued at $2.75 billion).
Skype, for those who don’t use it and there aren’t too many of us, makes software that allows for phone calls and video calls across the Internet – in many cases, free calls if it is between Skype-registered users. Calls to landlines can be made and are fairly cheap – $2.95 a month for unlimited calls in the U.S. and Canada, $12.95 a month to 40 countries around the world.
So what do these investors, lead by private equity investor Silver Lake, see in Skype?
The Obama administration is in the early stages of reviewing antitrust issues surrounding big telecoms companies – specifically, their alleged advantage over smaller players in locking up distribution deals with makers of sexy gadgets like Apple Inc.’s iPhone, Palm Pre and, to a lesser extent, BlackBerry Storm. The review, informal at this point, is being conducted by the U.S. Department of Justice, The Wall Street Journal reports. This comes on the heels of last month’s Department of Justice statement of concern about United Airlines and Continental Airlines’ plans to work more closely together as part of the Star Alliance. Moreover, the DOJ is investigating Google Inc.’s settlement with authors and publishers over its Book Search product. Clearly, the new president is crafting a new approach toward competition issues. Continue reading…
