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Telecoms sector outperforms on M&A talk, consolidation speculation

Stock Markets Jan 24, 2022 09:16
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By Samuel Indyk – UK telecoms companies were trading higher on Monday morning, boosted by increased speculation of M&A and consolidation in the sector.

Bloomberg reported that Vodafone (LON:VOD) had approached CK Hutchison (HK:0001) over a potential acquisition of Three UK, citing people familiar with the matter.

The interest reportedly came late in 2021 but the approach did not lead to an agreement and the two parties are not in active negotiations, the sources said.

Nevertheless, shares in Vodafone opened higher by over 4.5% on Monday morning. CK Hutchison shares closed higher by 1.3% in Hong Kong.

Telecoms consolidation

The discussions about consolidation in the industry arrive as Altice’s Patrick Drahi has built a large stake in Vodafone’s domestic rival BT (LON:BT). In December, Drahi announced he had lifted his stake to 18%, although the billionaire has repeatedly said that he will not make a full takeover offer for the UK telecoms giant. Under the rules of the Takeover Code, Drahi cannot make a hostile takeover for BT until June due to his previous statements.

Meanwhile, in Europe, Telecom Italia (MI:TLIT) is a target of US private equity firm KKR. Vivendi (PA:VIV), which is the largest shareholder in Telecom Italia, has previously criticised KKR’s bid, saying it doesn’t adequately value the business.

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

And in further news for Vodafone, Reuters reported today that the FTSE 100 component is in talks with Iliad to combine their businesses in Italy. Sources said that the two parties are in active discussions but any potential deal could face antitrust hurdles in Italy and from the European Commission.   

Telecoms sector outperforms on M&A talk, consolidation speculation

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