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Happy talk surrounds Everything Everywhere

by Jonathan Braude | Published June 26, 2012 at 1:27 PM

The bell started ringing, everyone got briefly excited -- and then the caller hung up. That, to cut a long story short, seems to have been the level of media excitement over reports earlier this month that Tom Alexander, the former chief executive of British mobile telecommunications and fixed-broadband network Everything Everywhere Ltd. had been canvassing private equity companies about a possible £8 billion ($12.47 billion) buyout of the company. Reports said variously that Alexander had approached CVC Capital Partners, Providence Equity Partners Inc. and Kohlberg Kravis Roberts & Co. LP about a possible bid for the British joint venture of Deutsche Telekom AG and France Telecom SA -- or that KKR and Apax Partners LLP were together backing an Alexander bid.

Then things got quiet. Although Everything Everywhere has been a bit slow in producing the £3.5 billion of cost savings its French and German parents had hoped for when they combined their British operations to create a 27 million-customer behemoth in 2010, it is not at all clear they are ready to sell up just yet. In fact, France Telecom was quick to issue a statement saying that no offer had been received and none had been invited. That proves nothing, of course. A formal offer would come quite late in the process. But then, on June 21, France Telecom CEO Stéphane Richard told Reuters, "We are happy with the joint venture. The Germans are also happy to be there, they do not wish to sell. We do not wish to sell either. If we receive an offer that makes sense, of course we will look at it. But that does not mean we will accept it."

That might have made all the hoohah seem at least a bit premature, especially when Richard's statement came on the day that Everything Everywhere announced it was handing its two shareholders a dividend of £125 million apiece. In any case, £8 billion seems an almost impossible sum for a private equity buyout in the current market, when firms are having to work hard to drum up debt.

Yet some private equity firms do at least seem interested. Apax is said to be less than keen on the kind of club deal it would have to do to make a buyout work. Sources point out that the firm has recently done some work with co-investors from among it's own LPs, but would shy away from working on an equal footing with another private equity firm. But even Apax has looked at the possibilities, since it has a particular fondness for telecoms. KKR has also been looking.

Maybe there is something for the buyout shops in the telecoms market in the U.K. after all. All the big operators will need to raise some cash for the forthcoming auction of 4G spectrum. There wouldn't be much point in bidding if they sell off the whole mobile operation to private equity at the first hint of an offer. But one can imagine an opportunity for minority investment in Everything Everywhere; and there may be some happy talk as individual units are spun out of the company later in the year.

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Happy talk surrounds Everything Everywhere

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