Merger fever sweeps Europe, with Swiss and Belgian deals

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Merger fever sweeps Europe, with Swiss and Belgian deals

By CAROLINE GABRIEL

Published: 26 November, 2009

With the merger of T-Mobile's and Orange's UK arms getting closer, the fever is spreading round Europe as cellcos look to join forces - via joint ventures, network sharing or all-out acquisition - to gain economies of scale. This week has seen two Swiss operators, Orange and Sunrise, planning to merge, and Holland's KPN selling its Belgian operation to Mobistar.

France Telecom is merging its Orange Switzerland unit with Danish carrier TDC's cellco in the country, Sunrise, to create a united front against incumbent Swisscom. Under the arrangement, France Telecom will hold a 75% stake in the new venture, investing €1.5bn. The merged company will have over 3.4m mobile users, giving it a 38% market share, while in fixed line it will have 1.1m or 13% of fixed broadband connections. Pro forma sales were €2bn last year and the partners expect synergies of €2.1bn.

TDC will now focus on its Nordic markets, planning eventually to exit Switzerland, perhaps by selling its 25% stake to the new company, which could use cash from a buyback program planned by the first quarter of 2014. That gives the entire stake a net present value of €1.2bn. The new unit will be led by the current CEO of Orange Switzerland, Thomas Sieber. Sunrise CEO Christoph Brand will leave after the initial integration. The company's brand has not yet been decided.

Over in Belgium, the country's second largest carrier, Mobistar, is to pay €65m for KPN's Belgian businesses, including business-to-business activities and the fiber optic network. "With this transaction, KPN has decided not to invest further in the Belgian B2B market, given the generally highly unfavorable competitive environment," KPN said in a statement. "As the Belgian state still has a majority stake in Belgacom, it remains hard to compete on price given the high prices they charge for access to their network."