ITV tipped for M&A in 202118 Dec 2020 15:14
Why Telecom Firms Are Among 2021’s Top European M&A Targets
By
Kit Rees
18 December 2020, 05:00 GMT
13 event desks, fund managers, analysts and brokers surveyed
KPN pips ITV to top spot amid prospects for more telecom deals
Next year’s most likely M&A targets include telecom stocks Royal KPN NV and BT Group Plc, according to merger and acquisition desks, as a revival in dealmaking activity is set to favor a sector that has struggled with competition and rising investment needs.
Dutch operator KPN was included in the M&A watch lists of eight of 13 event-driven traders, analysts, brokers and fund managers surveyed by Bloomberg News. BT and network-equipment maker Nokia Oyj were included three times.
Europe’s telecom stocks have been laggards over the past five years as costly network upgrades and price wars have weighed on the sector. Even as the pandemic prompted hopes that telecom firms would get a boost from increased data usage as more people worked from home during the lockdowns, the Stoxx 600 Telecom Index has underperformed this year, losing 15% of its value against a 4.3% decline for the broader benchmark.
With the persistent travails, some see chances the previously strict M&A regulation could be loosened a little. There are signs that the European Union’s opposition to mergers could be cooling, after its antitrust chief in June called for more cross-border deals, especially in the telecom industry.
Telecoms Lead
KPN, BT are named among top European M&A targets for 2021 in survey
Source: Bloomberg data
Note: 13 event desks, fund managers, analysts and brokers surveyed
Mergers in the telecom sector could be looked upon “more favorably” by regulators than before, as the carriers suffer from lower roaming revenue and economic growth, Thomas Fitzgerald, a fund manager at EdenTree Investment Management Ltd., said in emailed comments. Additionally, “the lure of 5G monetization could continue to draw interest from the private sector.”
Going Private
Aside from tower deals from the likes of Cellnex Telecom SA, there have been several notable telecom deals in Europe so far this year, in
KPN’s shares got a boost last month after buyout firm EQT AB was said to have approached the phone company about a takeover, though a subsequent Bloomberg News survey found that participants saw less than a 50% chance of a deal succeeding due to an anti-takeover law and other hurdles.
The pandemic has shone a light on the importance of faster networks, with Europe risking falling behind the U.S. and Asia if telecom firms fail to invest in 5G networks. The next generation of wireless broadband may potentially enable smart cities and factories, but is also another expensive investment for the carriers.
BT scrapped dividends for two years in order to fund a national fiber network rollout, and its share price hitting an 11-year low forced it to bolster takeover defenses. Finland’s Nokia has also been the subject of s
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