Tycoons’ odd telco bets mask a greater logic
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Jennifer Johnson
LONDON, Nov 26 (Reuters Breakingviews) -What do Mexican billionaire Carlos Slim, Indian tycoon Sunil Bharti Mittal, Liberty Global LBTYA.O “Cable Cowboy” John Malone and a bunch of similarly rich Gulf investors have in common? They’ve all bet on European telecoms, and not always successfully. That might be about to change.
In August, Bharti Mittal picked up a near-25% share of UK telco BT BT.L from Patrick Drahi, who acquired his stake in 2021. Slim, Latin America’s richest man, got involved in June by acquiring a stake that now exceeds 4% of the same company. Liberty Global has 5% of Vodafone VOD.L, building its stake from February 2023, and joining UAE group Emirates Telecommunications EAND.AD (e&), which first bought in May 2022 and now holds 15%. Completing the picture, the Saudi Telecom Company 7010.SE (STC) owns 10% of the Spanish group Telefónica TEF.MC.
When a big investor turns up in a company’s share register it’s often because they want to buy it, or push it to do something different. Yet none of the monied telco players seem to be proposing any major strategic changes. Nor has there been any suggestion that they might plan to make offers for 100% of the relevant business’s shares.
The investments have not always obviously stacked up from a financial point of view, either. Though STC, Bharti and Slim have seen share prices rise since they made their respective purchases, Drahi, Liberty and e& saw the opposite. The mixed picture is not surprising: between 2015 and 2023, the total market capitalisation of the EU’s telecoms sector fell by 41% to around 270 bln euros. Investors have long complained about the European Union’s strict adherence to the need for four players in national sectors, which has made it harder for the individual groups to invest and grow.
Even so, the tycoons’ wager may yet pan out. The UK’s Competition and Markets Authority looks likely to sign off on the merger of Vodafone with smaller rival Three before the year’s end. If so, the regulator’s acceptance of so-called behavioural remedies rather than so-called structural remedies - such as a mandated sale of assets – is likely to be seen as an M&A green light. New European competition tsar Teresa Ribera has signalled a keenness for the bloc’s companies to bulk up.
It’s not definite that this will translate into major, cross-border deals. But the odds are that it will enable at least in-market consolidation that could cut out costs, bolster margins and ultimately drive higher share prices. That would turn the odd bets of European telcos’ rich investors into smart ones.
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The European Union’s incoming competition chief, Teresa Ribera, said in an interview with the Financial Times on Sept. 19 that merger policy would “evolve” to allow companies to scale up.
High-profile investors don't necessarily drive returns https://reut.rs/3Z9UXR6
Editing by George Hay and Streisand Neto
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