Vodafone in talks to merge Greek unit
Considering combining with Wind Hellas to provide stronger competition for Deutsche Telekom's Cosmote
Published: 30 August, 2011
READ MORE: M&A | Greece | Vodafone Group
Vodafone has been focusing its M&A activity on emerging markets, but it is also looking to consolidate its operations in Europe to make itself more competitive against fellow giants like Deutsche Telekom, in a saturated region. While this has involved selling out of markets like France, where it offloaded its non-controlling stake in SFR, in Greece it is aiming to invest to gain a major market share.
The UK-based giant confirmed it is in talks to merge its own Greek subsidiary with Wind Hellas, though it stressed that negotiations are at an early stage. The combination would be a more effective rival in the recession-battered country for market leader Cosmote, which is controlled by Deutsche Telekom. The price has been reported at around €1bn.
Vodafone Greece has almost 4m customers, slightly ahead of Wind Hellas' 3.88m but well behind Cosmote's 7.73m. The leader is a unit of Greek national operator OTE, in which Deutsche Telekom recently raised its stake to 40%.
However, some analysts believe Vodafone should be reducing its activities in Greece, following the recent financial crashes there, rather than increasing its commitment. "Even before the crisis it was questionable whether investing in Greece would be wise," Heinz Steffen, an analyst at Fairesearch in Germany, told Bloomberg. "With the current situation there I'm really not sure that getting deeper into the market makes sense." But others are more positive. A merger would make the Greek market a duopoly with "more rational pricing and huge synergies", which would also be good for OTE, said Sanford Bernstein's Robin Bienenstock.
Amid the Greek financial crisis and EU bail-out, OTE is in talks with workers to cut payroll and other costs, and Deutsche Telekom has written down the value of its Greek investments. Wind Hellas has also had a turbulent recent past. Last year, a group of private equity firms led a reorganization, investing €420m and writing off debt in exchange for control of the company. Former parent, Weather Finance, the holding company of Egyptian billionaire Naguib Sawiris, had previously bought Wind Hellas out of bankruptcy.
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