Swisscom Mobile moves to buy out Vodafone

by: admin Thursday, November 23rd, 2006

Rating: hard talking

Vodafone’s beleaguered boss Arun Sarin has made no secret of willingness to sell the company’s 25% stake in Swisscom Mobile. According to the Financial Times on 14th November, ‘Were the transaction to go ahead, Swisscom’s net-debt limit would remain unchanged at 1.5 times earnings EBITDA [before tax, depreciation and amortisation], thus guaranteeing a high level of strategic flexibility”.

And bingo, Swisscom is entering into negotiations to buy Vodafone out of its mobile arm “to secure financial advantages, optimise the balance-sheet structure and improve its position in terms of implementing the Group’s strategy, notably in the area of convergent offerings. The successful strategic partnership with Vodafone would continue on the basis of a commercial agreement.”

What successful strategic partnership? This is good news for Vodafone’s woeful balance sheet (it reported a UKP 3.3bn first half loss earlier this month), but getting rid of the Brits isn’t a magic remedy to fix Swisscom Mobile’s ills. Swisscom needs to negotiate hard.

http://www.swisscom.com/GHQ/content/Media/Medienmitteilungen/2006/20061122_02_Vodafone.htm?lang=en

One Response to “Swisscom Mobile moves to buy out Vodafone”

bena roberts Said:

Swisscom is a dynamic operator, but the Swiss market is small. Competition in the mobile sector is not so much fierce as a battleground.

The Vodafone/ Swisscom saga is a tale of two beleagured players. Vodafone is trying to claw back its credibility and re-vamp itself into a “total communications player” while Swisscom is already the epitome of a “total communications player”, but is forced to do battle for the youth market with the likes of Orange.

Swisscom has been touting for partners and partnerships for a long time. Talks with Telekom Austria bombed and since then it has found itself in a predicament. Vodafone represented a handshake with the international market and a friendly force to fend off take-overs: Swisscom is a lucrative target.

Where does Vodafone pulling out leave Swisscom? Still needing partners. Consolidation is rife in telecoms and the trend will intensify. Rivals in Switzerland such as TDC (sunrise) and Orange have international parents whereas Swisscom is only king of its own, small castle – a dangerous situation. Partners have to be Swisscom’s priority.

Telekom Austria is still its best bet.

Comment made on November 23rd, 2006 at 7:49 am