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Wednesday, November 25, 
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Alix Partners LLC presents Middle Market Review

Midmarket telecom sector hits doldrums

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Published July 7, 2009 at 8:00 AM

telephone_pole_125x100.jpgThe volume of global middle-market telecom deals since June has looked as sluggish as the world economy.

Japan's largest mobile operator NTT DoCoMo's (NYSE:DCM) decision to pay $45.5 million in cash for a 35% stake in PacketVideo, a wireless and multimedia software maker and unit of NextWave Wireless Inc. (NASDAQ:WAVE), on Monday marked only the fourth middle-market transaction announced since June 1, according to The Deal Pipeline (subscription required). That total pales in comparison to the nine middle-market deals in the sector in the year-ago period.

The three other middle-market deals since June include:

  • Atlantic Tele-Network Inc.'s $200 million purchase of Verizon Wireless' operations in six states on June 9
  • Nokia Siemens Networks BV's (NYSE:NOK) $650 million acquisition of Nortel Networks Corp.'s wireless infrastructure business on June 16
  • Intel Corp.'s (NYSE:INTC) purchase of Wind River Systems Inc. (NASDAQ:WIND) for $884 million on June 4. That deal gave the chipmaker an inroad into products ranging from smartphones, mobile Internet devices and other consumer electronics to networking equipment, aerospace, energy and others. (subscription required)

The slowdown in middle-market dealmaking within the telecom sector can be attributed to the usual suspects of tight credit markets, risk-averse companies unwilling to open their wallets and buyers waiting on the sidelines to pick up assets at a discount from troubled sellers.

However, buyers may not be able to sit on the sidelines for too much longer as more telecom assets come up for sale. Eircom Holdings Ltd. reportedly may sell its debt-laden Irish telecom Eircom Ltd., which owes $5.3 billion. Permira Advisers Ltd. has joined the handful of bidders looking seriously at Eircom Ltd. Meanwhile, a court order has requested bids for Hawaiian Telecom, which fell into Chapter 11 in December.

Then there are the rural U.S. telecoms, which may see more consolidation, such as Windstream Corp.'s purchase of Ephrata, Pa.-based phone, broadband and television provider D&E Communications Inc. for $330 million. A recent Deal magazine article notes: "While some midsized rural players can continue to operate independently, savings and other benefits from combining with larger companies will continue to drive them to seek deals that allow them to invest in broadband technologies and cover dividends." - Gerald Magpily

See The Deal Pipeline: Nortel clear to start wireless auction (subscription required)
See The Deal Pipeline: Deal Memo on Nokia Siemen's transaction (subscription required)
See The Deal Pipeline: Rural rollups (subscription required)
See The Deal Pipeline: Intel to buy Wind River Systems (subscription required)
See The Deal Pipeline: Verizon Wireless sheds more rural assets (subscription required)
See The Deal Pipeline: Deal Memo on Atlantic Tele-Network transaction (subscription required)



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