Telecom Sector Outperforms on M&A Talk, Consolidation Speculation By


© Reuters.

By Samuel Indyk – British telecommunications companies were trading higher on Monday morning, boosted by increased speculation about mergers and acquisitions and consolidation in the sector.

Bloomberg reported that Vodafone (LON:) had approached CK Hutchison (HK:) about a potential acquisition of Three UK, citing people familiar with the matter.

Interest is believed to have surfaced in late 2021, but the approach has not resulted in an agreement and the two sides are not in active negotiations, the sources said.

Nonetheless, Vodafone shares opened more than 4.5% higher on Monday morning. Shares of CK Hutchison closed up 1.3% in Hong Kong.

Telecom Consolidation

Consolidation talk in the industry comes as Altice’s Patrick Drahi has built a large stake in Vodafone’s domestic rival BT (LON:). In December, Drahi announced he had increased his stake to 18%, despite the billionaire repeatedly saying he would not make a full takeover bid for the British telecoms giant. Under Takeover Code rules, Drahi cannot make a hostile takeover bid for BT until June due to his previous statements.

Meanwhile, in Europe, Telecom Italy (MI:) is a target of US private equity firm KKR. Vivendi (PA:), which is Telecom Italia’s largest shareholder, previously criticized KKR’s offer, saying it did not value the company enough.

A deal looks even less likely after Telecom Italia recently appointed Pietro Labriola as CEO. Vivendi supported Labriola’s nomination.

And in other news for Vodafone, Reuters today reported that the component is in talks with Iliad to combine their operations in Italy. Sources said the two sides were in active discussions, but any potential deal could face antitrust hurdles in Italy and from the European Commission.

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