A wave of acquisitions is expected in the debt-laden telecoms sector after the coronavirus pandemic – how will governments react?
Over the weekend, Spanish website El Confidencial reported that KKR, Cinven and Providence have made their Public Acquisition Offer (OPA) for MásMóvil.
The three venture capital funds have proposed to the board of directors to pay €22.5 per share of the telco, which is valued at almost €3 billion. The funds have the option of raising the price per share to €26.
An official statement said that KKR, Cinven and Providence will pay a 20% premium on the current MásMóvil share price (which surged as the news broke.
Is it enough?
However, the price is 13% below the weighted average of analysts who track the Spanish telco sector and think a more equitable price would be €25.46 per share.
The report claims that the OPA is completely friendly and has the approval of the board of directors and, above all, of the management team, led by Meinrad Spenger and José María Echarri.
Further, the three funds have agreed with these executives an extraordinary bonus of at least more than €120 million if they win control of MásMóvil then achieve certain financial and business objectives.
Still, the Spanish market is attractive, with a high fibre penetration. It could be that others will rival the bid – Spain is a key market for Orange, for instance, and Deutsche Telekom lacks a presence there beyond a couple of data centres run by its subsidiary T-Systems.
Let the games begin
Many telcos are struggling with stagnant revenues and massive debts, and will suffer repercussions from the COVID-19 pandemic, at least in the short term and are targets for takeovers and mergers, or can themselves make strategic acquisitions.
The path was cleared last week when the European Commission’s general approach of being against consolidation suffered a hammer blow: the General Court of the European Court of Justice found against and annulled the Commission’s decision to prevent the proposed merger of O2 UK and Three UK in 2016.
On the other hand, the pandemic underlined, in spectacular fashion, the critical importance of the communications infrastructure to countries' economies and just how far governments are prepared to see them sold off and to whom remains to be seen.