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Vodafone abandons Greek merger plan

by Andrew Bulkeley | Published February 6, 2012 at 9:11 AM

U.K. cellphone giant Vodafone Group plc Monday, Feb. 6, said it ended talks to buy Wind Hellas Telecommunications SA amid fears regulators would disconnect the deal for creating a duopoly in struggling Greece.

"Vodafone Group and Largo Ltd., the sole shareholder of Wind Hellas, confirm that they have agreed to terminate discussions relating to a potential business combination between Vodafone Greece and Wind Hellas," Vodafone said in a brief statement.

Newbury, England-based Vodafone wanted to merge Wind Hellas, the No. 3 Greek mobile company, with its own Greek unit to take on market leader Cosmote Mobile Telecommunications SA. But that would essentially cut the Greek market to just two providers with near-equal market shares.

Cosmote is owned by former government monopoly Hellenic Telecommunications Organization SA, or OTE, in which Germany's Deutsche Telekom AG has an indirect 40% stake.

News outlets including the Financial Times reported in recent days that European Commmission regulators had concerns about the proposed transaction.

Competition watchdogs have frowned on duopolies in the past. In 2010, Switzerland's competition authorities quashed the planned €1.5 billion ($1.96 billion) acquisition of Sunrise Communications AG by France Télécom SA's Orange Switzerland division. The deal would have left the Alpine country with just two cellular companies: Swisscom AG and Orange.

The dealmaking highlights the efforts Europe's major cellphone companies are putting into repairing the damage caused by weakening economies and stiff competition. France Télécom in December agreed to sell Orange Switzerland to buyout shop Apax Partners LLP for Sfr2 billion ($2.16 billion) to escape the tough pricing pressure.

Greece's precarious economic position is also adding stress to local cellphone companies. In addition, Athens is planning on re-auctioning most of its wireless spectrum after the current leases expire in September.

The unorthodox sale is expected to bring in at least €240 million.

Vodafone, which was reportedly willing to pay €1 billion for its Greek rival, was negotiating with Wind's debtholders. The Wind creditors took over the company and ousted Egyptian telecom tycoon Naguib Sawiris in 2010 after it stumbled and a buyer couldn't be found.

Vodafone CEO Vittorio Calao himself has had to reshuffle his company's investments after investors threatened to mutiny. He's sold minority stakes in China Mobile Ltd., French wireless company Société Française du Radiotéléphone and Polish phone company Polkomtel SA.

Wind bondholders are being represented by the ad-hoc Largo Ltd. committee of Mount Kellett Capital Partners (Ireland) Ltd., Taconic Capital Advisors UK LLP, Providence Equity Capital Markets LLC, Anchorage Capital Group LLC, Angelo, Gordon & Co. and Eton Park International LLP.

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