29/03/2010 ( Source: http://www.nytimes.com )

Telecom Industry Ripe for Consolidation

Naguib Sawiris, the chief executive of Orascom, the Egyptian group that runs wireless phone networks around the world, believes the global industry of mobile operators is about to enter a turbulent period of Darwinian struggle.

“The next few years will witness major consolidation,” Mr. Sawiris said last month at an industry convention. “All small and medium-sized operators are looking for appropriate M.&A. deals to be able to secure themselves a place on the new world map.”

With global markets on the upswing and governments around the world looking to blanket populations with mobile broadband service, experts say the wireless industry is poised for a wave of mergers and deals that could reshape the industry.

While the growth in demand for mobile data helped operators weather the economic downturn, the global financial crisis slowed the pace of M.&A.’s, or mergers and acquisitions.

The value of global transactions in the telecommunications sector fell to $80.4 billion last year from a peak of $284.7 billion in 2005, according to Mergermarket, an analysis firm. But already this year, deal making has picked up and the market is on track to grow by 50 percent.

Of the $31.2 billion in transactions through March 18, 83 percent is tied to the Mexican billionaire Carlos Slim Helú’s consolidation of his holdings in three Latin American carriers, América Móvil, Carso Global and Telmex Internacional, in deals worth $23.8 billion.

But other large transactions, like the $10.7 billion bid from Bharti Airtel, of India, for African businesses owned by Zain, a Kuwaiti operator with networks in the Middle East, are also on tap. Bharti said last week that it had completed its due diligence and expected to sign a final purchase agreement soon.

Expectations of a wave of consolidation in Europe have been raised by two deals involving France Télécom, which since November has merged its Orange mobile operations in Britain and Switzerland with T-Mobile of Germany and TDC of Denmark, respectively.

Most European mobile markets are mature and static, with a handful of operators typically competing for each other’s customers. With cellphone penetration rates exceeding 100 percent, there is little room to grow and slim prospects of overtaking entrenched leaders.

“We came to the conclusion in Britain and Switzerland that there were limits to growth and it was better to consolidate and proceed with partners,” Gervais Pellissier, France Telecom’s chief financial officer, said during an interview. “Also, growth in the future will come from mobile broadband, not voice, and for that you need the biggest possible network.”

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