Merger watchdogs face raft of decisions on telecoms tie-ups

Date: 10/02/2000

By Peter Chapman

EU MERGER watchdogs will face tough decisions on a raft of complex new telecoms deals between European firms in the wake of two of the world's biggest-ever corporate tie-ups, according to industry experts.

The prediction comes as the European Commission's merger task force prepares to wave through the €128.5-billion merger between US giants MCI WorldCom and Sprint later this month, and officials investigate the €200.8-billion hand-over of Germany's Mannesmann to British mobile-phone company Vodafone Airtouch.

Both these deals, which have changed the world's telecoms map, are expected to be cleared with few problems by Commission competition officials.

Analysts believe MCI WorldCom's deal will not face any major hurdles at EU level because Sprint has relatively few interests in the Union market now that it has left the Global One joint venture with France Telecom and Deutsche Telekom. "Most of Sprint's assets are in the US," said one. "I would find it very strange if the Commission did not clear this straight away."

Analysts also predict that Vodafone Airtouch's landmark deal is likely to be given a smooth ride by regulators, provided the company sells Mannesmann's newly-acquired mobile firm Orange.

Although Competition Commissioner Mario Monti said this week that officials would examine the broader impact of the deal on the EU market, he confirmed that Vodafone Airtouch had offered concessions relating to Orange in a bid to allay competition fears. Monti added that officials would analyse the offer and a decision would be made on 28 February.

"As long as they deal with Orange in a fair and above board way there will be no problem," said a City of London telecoms expert.

However, a senior analyst at Credit Lyonnais Securities, Tressan MacCarthy, predicted that these two mega deals would herald a frenzy of activity by European rivals desperate to find partners before they become too small to catch up.

One likely target for firms eyeing up the competition is the UK's Cable & Wireless, which is currently selling off its stake in the lucrative Hong Kong Telecom operator. "It could be that Deutsche Telekom or France Telecom takes it over once it has sold its stake in Hong Kong Telecom," said MacCarthy. "Further down the line there are some who think BT could be taken over - possibly by AT&T."

She also predicted that big EU telecoms operators would now come under pressure to focus their attention on ventures where they are the lead player, selling their stakes in companies where they have small and relatively insignificant shareholdings.

Sources at Deutsche Telekom admit that the race is on for firms to find partners before they are left behind by the new breed of 'supercarrier' typified by Vodafone Airtouch and MCI WorldCom, although they refused to confirm that the speculation about a possible tie-up with Cable and Wireless. "It has been on the 'who talks to who' list for the last two years," said one.

EU merger watchdogs will face tough decisions on a raft of complex new telecoms deals between European firms in the wake of two of the world's biggest-ever corporate tie-ups, according to industry experts.