|Bid||135.82 x 0|
|Ask||135.84 x 0|
|Day's Range||135.12 - 137.24|
|52 Week Range||92.76 - 195.65|
|Beta (5Y Monthly)||0.68|
|PE Ratio (TTM)||N/A|
|Earnings Date||May 12, 2020|
|Forward Dividend & Yield||0.08 (5.81%)|
|Ex-Dividend Date||Jun. 11, 2020|
|1y Target Est||2.01|
Alphabet's (GOOGL) Google is in talks to acquire a minority stake in Vodafone Idea in a bid to expand footprint in the telecom market of India.
Google is in early talks to buy a 5% stake in Vodafone Idea, the joint venture between Vodafone and India's Aditya Birla Group.
(Bloomberg) -- Follow Bloomberg on LINE messenger for all the business news and analysis you need.Alphabet Inc.’s Google is considering acquiring a stake in Vodafone Group Plc’s struggling Indian business, the Financial Times reported, joining Facebook Inc. in investing in the world’s fastest-growing mobile arena.Google may take a stake of about 5% in Vodafone Idea, a partnership between the U.K. telecom carrier and the Aditya Birla Group, though the deliberations are at a very early state, the FT cited people familiar with the matter as saying.Any deal would come weeks after Facebook paid $5.7 billion for a slice of digital assets controlled by Mukesh Ambani, Asia’s richest man. The deal was a landmark investment followed in successive days by major influxes of capital into India’s tech industry led by private equity firms.Spokespeople from Vodafone and Vodafone Idea declined to comment. Google itself has big ambitions for India, a country with a huge first-time internet user population that serves as a test-bed for innovations in smartphone technology.Facebook’s alliance with Ambani’s Reliance inserted a powerful new competitor into a crowded Indian internet industry already contested by Google, Walmart Inc., Amazon.com Inc. and SoftBank Group Corp.-backed local outfit Paytm. But none of them have the reach of WhatsApp, the nation’s most popular communications platform.India has been a critical component of Google’s Next Billion Users initiative, its attempt to rope in hundreds of millions of users as they come on the internet in emerging markets like India. It’s targeted users in the market for products as varied as train station Wi-Fi, maps and digital payments. Vodafone’s Indian telecom unit is struggling following a $4 billion demand for back fees in addition to more than $14 billion of debt. The wireless operator, formed by the merger of Vodafone Group’s local unit and billionaire Kumar Mangalam Birla’s Idea Cellular Ltd., hasn’t reported a quarterly profit since announcing the deal in 2017, and is headed toward insolvency in the absence of any relief from the government, Birla warned in December.India’s top court recently sided with the government and ordered that the full amount of back fees be paid within three months. When the companies dithered and filed pleas, the Supreme Court threatened to initiate contempt proceedings for non-compliance.(Updated with context throughout, comment from Vodafone)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- It’s easy to ban a product that’s difficult to get your hands on anyway.That’s why Britain’s possible move to impose a stricter ban on Huawei Technologies Co. seems opportunistic, even if it does now make sense. It’s taking advantage of harsher U.S. sanctions on the Chinese telecoms-equipment giant to consider extending the U.K.’s halfway measures unveiled with great fanfare in January. A final decision will come after the government’s National Cyber Security Centre reviews implications for the security of the country’s phone networks.Earlier this month, the U.S. imposed more stringent guidelines on Huawei, restricting any firm that uses American equipment from selling to the Chinese technology company without its approval. That means Huawei won’t be able to get chips from companies such as Taiwan Semiconductor Manufacturing Co. because they’re likely made using machines from firms such as California-based Applied Materials Inc. So Huawei may effectively find itself cut off from access to the high-tech silicon it needs for its networking gear. This provides a convenient excuse for Prime Minister Boris Johnson’s government to revisit its more nuanced approach with regards to Huawei, which provoked U.S. ire in the midst of efforts to strike a new Anglo-American trade pact and a rebellion from a group of Conservative lawmakers.Initially, in a break with the U.S., the U.K. had decided to retain some access to Huawei’s products for its carriers’ rollout of fiber-optic and fifth-generation mobile networks. It proposed capping the Chinese company’s share to 35% of non-sensitive parts of a mobile network in order to keep operators from being reliant on a Nordic duopoly of Ericsson AB and Nokia Oyj. Now ministers are drawing up proposals to reduce that share to zero.The irony is that, given the recent U.S. measures, Huawei may find it very difficult to keep competing for orders. The company probably won’t be able to buy many of the chip sets it needs to make things such as wireless base stations. The quality of those products will suffer as it’s forced to seek out new suppliers, likely in China itself, where semiconductor technology is still playing catch-up. That could make carriers rethink who supplies their 5G equipment even before any national ban kicks in, according to Bloomberg Intelligence analyst Anthea Lai.Even though a ban on new Huawei gear might now be easier, the question of how to handle the existing networks is not. Huawei’s equipment currently accounts for two-thirds of BT Group Plc’s mobile network, and one-third of Vodafone Group Plc’s U.K. mobile network, according to UBS Group AG analyst Polo Tang. BT has already said that swapping the kit out would cost it 500 million pounds ($615 million) over the next five years. Reducing it to zero could double that expense, Tang said.The U.K.’s previous 35% limit applied to an operator’s overall network, but forcing operators to replace any already installed Huawei gear would strain capital requirements and jeopardize ambitious goals for new network build-out — Prime Minister Boris Johnson has said he wants the whole country to have access to gigabit internet speeds by 2025. It seems that the government is taking that into account. The Times of London reported that the new proposals would only prohibit the purchase and installation of new equipment from 2023.Which serves to underline how opportunistic the new review looks. The main argument for letting carriers continue to use Huawei was to ensure that network investment continued apace. Now that the U.S. crackdown looks likely to reduce the quality and availability of Huawei products, it’s a chance for the government to assuage both rebellious lawmakers and critics across the Atlantic. And with global antipathy toward China rising over its handling of the Covid-19 outbreak and crackdown in Hong Kong, there’s now little point in further testing the straining U.S. alliance.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Vodafone <VOD.L>, the world's second-biggest mobile operator, has recruited Jean-Francois Van Boxmeer, the current CEO of brewer Heineken <HEIN.AS>, to succeed Gerard Kleisterlee as chairman from November this year. Van Boxmeer "is a very experienced businessman, with an in-depth knowledge of our geographic regions and he brings very strong sales and customer focus," said Kleisterlee, who has been Vodafone's chairman for nine years.
(Bloomberg) -- In early March, before the coronavirus pandemic triggered a global economic lockdown, SoftBank Group Corp. founder Masayoshi Son paid tribute to Rajeev Misra, the man who runs his $100 billion technology investment fund. Wearing a $70 Uniqlo down jacket, the Japanese billionaire put his arm around Misra’s shoulders at a town hall meeting in San Carlos, California. He said he would never forget the help Misra provided when he was at Deutsche Bank AG more than a decade earlier and spoke of the trust and respect they had developed since, according to a summary shared internally. “We are family,” Son said. But behind the smiles and talk of kinship, another story is unfolding, one about the perplexing relationship at the top of SoftBank. The Vision Fund this week reported a loss for the latest fiscal year of $17.7 billion as it wrote down the value of portfolio companies including WeWork and Uber Technologies Inc. That triggered the biggest loss in SoftBank’s 39-year history. Its shares have been hammered as investors fret that the virus will batter the company’s holdings even more, and Son has said he will sell $42 billion in assets.Misra is at the heart of the problem in ways that go beyond how the fund’s companies are performing, people familiar with the matter say. He has come under fire for alleged efforts to tarnish internal rivals, including a previously undisclosed clash with SoftBank Chief Operating Officer Marcelo Claure. The company has acknowledged that it’s conducting an internal review. At the same time, Elliott Management Corp., the activist investment fund that built up an almost $3 billion stake in the company, has asked SoftBank to name three independent directors and create a new board committee to improve the Vision Fund’s investment process, according to correspondence reviewed by Bloomberg News.“Misra and Masa go back a long way, but gratitude should only last so long,” said Justin Tang, head of Asian research at United First Partners in Singapore. “If Misra is not the problem, he’s at least a big part of it.”The corporate intrigue involving Claure began in 2018, when the Bolivian entrepreneur was under consideration to join the Vision Fund’s board and investment committee, according to six people with first-hand knowledge of the matter and a review of emails and documents. The fund — run by Misra as an affiliate of the Japanese company — hired a Swiss firm called Heptagone to conduct a background check on Claure’s possible ties to money laundering and drug cartels, said the people, who asked for anonymity because they feared retaliation. The report cleared him, but its focus opened a rift between the two men that kept Claure off the fund’s board and solidified Misra’s control, the people said.A Vision Fund spokesman said one of the fund’s limited partners, not Misra, requested the background check and Misra wasn’t involved in determining its focus. SoftBank has been told the same thing and doesn’t have evidence otherwise, people familiar with the matter say. But current and former executives across the SoftBank empire remain convinced that Misra played a role since the report was commissioned by his team and follows a pattern of similar accusations about undermining internal rivals. In March, days after the Wall Street Journal reported that Misra had allegedly orchestrated a campaign to sabotage two former SoftBank executives beginning in 2015, Son ducked questions about the story from investors at a meeting at the Lotte New York Palace hotel, according to two people who were present. One of them, a SoftBank shareholder, told Bloomberg News afterward that the company needs a Vision Fund leader more focused on tight operations than turf battles. Son has remained steadfast in his support. “Rajeev has been instrumental in the company’s growth and success,” Son said in a statement to Bloomberg. “He’s also been a very trusted senior executive and friend, and will continue to have my full support and confidence.” The Vision Fund spokesman denied that Misra was involved in any campaigns to undermine company executives. “The claims underpinning this story are untrue, and have been fully denied,” he said.But some SoftBank insiders are wondering how Misra has managed to survive. It may be, they said, that Son needs his financial expertise to navigate the next few months of asset sales, share buybacks and loan repayments as the coronavirus weakens portfolio companies, hurting SoftBank’s ability to borrow. Misra helped Son finance difficult deals before joining the company in 2014 and played a crucial role in raising capital for the Vision Fund. He has also established his own power base at the fund’s London headquarters, surrounded by a coterie of former Deutsche Bank colleagues.Still, there are long-term risks for Son in tolerating what many see as a divisive culture and chaotic infighting that have plagued the Vision Fund since its inception. “Misra personifies what Vision Fund is about — a bunch of dealmakers obsessed with leverage who have no business running a venture capital fund,” said Amir Anvarzadeh, a market strategist at Asymmetric Advisors in Singapore, who has been covering the company since it went public in 1994. “But it would be naïve to put all of their problems at Misra’s feet. Son has the ultimate word.” Son and Misra share a bond as outsiders who left their native lands to study abroad and ended up finding wealth and prestige. Son, 62, went to the University of California, Berkeley and launched businesses in the U.S. before founding SoftBank in Japan in 1981. Misra, 58 and born in India, earned degrees from the University of Pennsylvania and the Massachusetts Institute of Technology before embarking on a career in banking at Merrill Lynch.But while Son never worked for anyone else, Misra always operated within large organizations, navigating their power structures. He moved to Deutsche Bank in 1997, where he eventually became global head of credit trading, turning it into one of the biggest traders of credit-default swaps — instruments at the heart of the 2008 financial crisis. One of his traders, Greg Lippmann, featured in Michael Lewis’s The Big Short, bet on a crash in the U.S. housing market, even as Deutsche Bank was a leading player in creating and selling mortgage-backed securities to investors. With slicked-back hair and a thicket of woven bracelets around his wrist, Misra speaks with an intimacy that suggests he’s confiding in a listener as he races from one subject to the next with a burning urgency. He wears his eccentricities proudly: He often padded around the office in stockinged feet, incessantly smoking, vaping or chewing nicotine gum.Misra joined SoftBank after stints at UBS Group AG and Fortress Investment Group. He started as head of strategic finance, reporting directly to Son, but his connections to the boss preceded his appointment. In 2006, Deutsche Bank helped SoftBank finance the acquisition of the Japanese wireless operations of Vodafone Group Plc, one of the most consequential deals of Son’s career. The $15 billion purchase was the largest leveraged buyout ever in Asia at the time and faced skepticism because Vodafone had struggled against the country’s top wireless players. Son succeeded in turning the business into a viable competitor, in part by persuading Steve Jobs to give him exclusive rights to the iPhone in Japan, and completing SoftBank’s transformation from software distributor to telecom conglomerate.Misra proved his worth at SoftBank as well. Son had acquired the troubled No. 3 wireless operator in the U.S., Sprint Corp., but the turnaround had proven far more difficult than the one at Vodafone. Misra put together a novel loan package secured by Sprint’s wireless licenses that helped it avoid bankruptcy.From the start, Misra clashed with Nikesh Arora, a hotshot former Google executive Son recruited in 2014 to oversee SoftBank’s startup investing, according to people with direct knowledge of their relationship. Arora would openly question Misra’s judgment, even on financial issues, leaving him fuming, the people said.In early 2015, Misra set out to undermine Arora and one of his allies at SoftBank, Alok Sama, the Wall Street Journal reported in February. The newspaper said Misra worked through intermediaries to plant negative stories about the executives, concocted a shareholder campaign against them and attempted unsuccessfully to lure Arora into a sexual tryst. “These are old allegations which contain a series of falsehoods that have been consistently denied,” a spokesman for Misra told Bloomberg News, adding that Misra thinks highly of Arora and that the two men worked together productively on many deals. “Mr. Misra did not orchestrate a campaign against his former colleagues.” A spokesman for the Wall Street Journal said the paper stands by its reporting.Arora was cleared of wrongdoing by SoftBank, but he left in 2016 and is now chief executive officer of Palo Alto Networks Inc. Sama, who had been in charge of SoftBank’s investments and inked many of its early startup deals, seemed a logical candidate to play a leading role at the Vision Fund. But some of the limited partners expressed reservations about him, people familiar with the matter said. Arora didn’t respond to requests for comment, and an attorney for Sama declined to comment.Meanwhile, Misra solidified his ties to Son. He spent time in Tokyo in early 2017 as Son worked on the acquisition of Fortress. He also used his former Deutsche Bank connections to help close a deal for Saudi Arabia’s Public Investment Fund to become the Vision Fund’s cornerstone investor, chipping in $45 billion, almost half of the capital. That May, Misra was named head of the Vision Fund. The clash with Claure began after Sama was sidelined, according to SoftBank executives familiar with the matter. Son hit it off with Claure in 2013, when SoftBank took a majority stake in Brightstar, a Miami-based mobile phone distributor he founded that became one of Latin America’s fastest-growing startups. The 6-foot-6 executive quickly demonstrated how SoftBank could save millions on its purchases, winning respect from his new boss. A year later, Son tapped him to replace Sprint’s CEO. Claure made enough progress fixing the wireless operator that Son rewarded him with a seat on SoftBank’s board in 2017 and named him chief operating officer the following year. Then, Son gave Claure a new challenge: building teams in government affairs, legal services and operations to support the company’s expanding portfolio. Part of the mission was to assemble and lead a task force that would help startups fine-tune their strategies to improve execution and speed their path to profitability. The mandate would place him at the center of the action as SoftBank transformed itself into a technology investment conglomerate. It also apparently put Claure on a collision course with Misra.The first hint that this might not be a typical corporate rivalry came months before the Heptagone investigation, according to a person close to Claure. In the summer of 2018, Stephen Bye, a former Sprint executive, reached out to Claure with unsettling news. Bye, Sprint’s chief technology officer until 2015, was approached by a private investigator trying to dig up dirt on his former boss, the person said. Bye declined to talk to the investigator and immediately called Claure. Claure, 49, was used to people poking into his past because he was often approached about joining corporate boards. But he had also heard speculation about Misra’s role in the campaigns against Arora and Sama, and he expressed concern that he was next, the person said. The Vision Fund spokesman said neither Misra nor anyone else from the fund was involved in the approach to Claure’s former employee. Bye declined to comment.In October 2018, after the murder of Washington Post columnist Jamal Khashoggi at the hands of Saudi agents, Son and Misra traveled to Riyadh to meet with officials of the sovereign wealth fund, their biggest investor. They made the trip during the Saudi fund’s annual investment conference, even as other global executives canceled their travel plans. While the two men didn’t attend the conference, Son met with the head of the Public Investment Fund, Yasir Al-Rumayyan, and laid out the new role he envisioned for Claure. He would join the Vision Fund board and its investment committee, and manage the group of operations specialists when it was embedded within the fund, according to a proposal reviewed by Bloomberg News. The changes, if implemented, would give Claure broad authority at the fund.Later that year the Vision Fund commissioned the Heptagone report. What made it different from routine due diligence, according to the people directly involved, was that the sleuths were asked to answer three specific questions: Was Claure or any company under his control ever involved in money laundering, tax evasion or fraud? Was he ever in a relationship with individuals charged with or convicted of money laundering, drug trafficking or other crimes? Had he been convicted of a crime in the U.S. or elsewhere? Claure’s company, Brightstar, generated enormous amounts of cash selling used phones in Latin America in the 1990s, exactly the kind of business that could be used for money laundering, Heptagone’s report said. But the report found no evidence Brightstar or Claure were involved in such activities, people who saw it said.Heptagone went on to say that Claure had a long-standing friendship with Carlos Becerra, a San Diego businessman whose name had appeared in U.S. Drug Enforcement Agency reports for possible involvement in cocaine distribution and money laundering. After Becerra sold a unit of his company to Brightstar, in 2007, the two men remained friendly. A photo on Becerra’s Instagram account from June 2015 showed him posing on a boat dock with Claure. Becerra, who hadn’t been charged with a drug-related crime, told Bloomberg News that his relationship with Claure was cordial, not close. He denied any involvement in money laundering or drug dealing and said he has held a California liquor license since 2001, which requires a background check and isn’t available to anyone with a criminal record. The closest Claure came to a crime, the Heptagone report found, was his involvement in a Miami bar fight in the 1990s in which no one was hurt and he wasn’t charged. Heptagone co-founder and managing partner Alexis Pfefferlé said he couldn’t confirm or deny his firm’s involvement in any report but added that Heptagone “has always been able to fully complete its assignments.”The Vision Fund spokesman said the fund often runs background checks on employees, so it wasn’t abnormal to conduct one on Claure, given his potential involvement in operations. The only thing atypical, he said, was that it came at the request of a limited partner. While the Heptagone report cleared Claure, its underlying premise appeared to be that a Latin American entrepreneur must have built his business through unsavory means, according to the people who reviewed the document. Claure was furious. He went to Son, outraged at what he saw as an attempt to damage his reputation, the people said. SoftBank took over the due diligence from the Vision Fund and gave the job to Kroll, a more established security firm, the people said. Kroll, which declined to comment, found no problems in Claure’s past. But suspicious that Misra was behind the campaign, Claure told Son he wanted no formal part of the Vision Fund, the people said. Son ultimately decided to keep the two out of each other’s way. In February 2019, about 40 employees Claure had hired were shifted over to work for Misra. Claure, who had moved his wife and four youngest daughters to Tokyo less than two months earlier, headed back to Miami. He has since helped close Sprint’s merger with T-Mobile US Inc. and is leading the effort to turn around WeWork. He also oversees a Latin American investment fund for SoftBank and co-owns a Major League Soccer team, Inter Miami, with former British star David Beckham. SoftBank denied that Claure and Misra clashed over the operations group and said both men agreed that folding it into the Vision Fund was in the best interests of the business. “While we have had our occasional differences,” Claure said in a statement, “I have a close and collaborative relationship with Rajeev, including my involvement with many of the Vision Fund’s largest portfolio companies.” The relationships Misra forged at Deutsche Bank continue to underpin his power and influence. Colin Fan, a former co-head of the investment bank, moved to SoftBank in 2017, joining more than half a dozen former bankers and traders from the German lender. But arguably the most important connection forged at Deutsche Bank is Misra’s relationship with London-based merchant bank Centricus, founded by three former Misra colleagues: Michele Faissola, Dalinc Ariburnu and Nizar Al-Bassam. The firm, originally called FAB Partners for the principals’ last names, began working with SoftBank in 2016, when Misra asked it to help find financing for the Vision Fund. Centricus advised on the creation and structure of the fund, suggested employees and helped cement the investment by the Saudi sovereign wealth fund — a deal hashed out in October of that year when Mohammed bin Salman, then the country’s deputy crown prince, met with Son in Tokyo.For its work, Centricus negotiated a payment of more than $100 million, people familiar with the arrangement said. And the fees kept coming. Centricus advised SoftBank on its $3.3 billion deal for Fortress and teamed up with Son on a failed bid to start a 24-team soccer tournament with FIFA. The firm also was brought in to help raise capital for a second Vision Fund, Bloomberg reported in mid-2019.Some SoftBank and Vision Fund executives have questioned the amount paid to Centricus, the people with knowledge of the arrangement said. Although fees for helping companies raise capital are often about 1%, making the sum paid to Centricus a good deal for SoftBank, executives critical of Misra’s leadership were piqued that the recipients were former Deutsche Bank colleagues, the people said. Centricus and SoftBank both declined to comment about fees or any other aspect of their relationship.Faissola left the firm after his connections with the Qatari government created tension with the Saudis. But Centricus hired another former Deutsche Bank colleague of Misra’s as a consultant: London-based hedge fund manager Bertrand Des Pallieres, a senior trader at the bank from 2005 to 2007 who reported directly to Misra. Des Pallieres was under consideration for a job at the Vision Fund in 2018, the people said, but that all changed after the Wall Street Journal reported that Misra had recruited Italian businessman Alessandro Benedetti to undermine Arora and Sama. Benedetti, who denied through a spokesman that he had anything to do with those efforts, was a business associate of Des Pallieres. A year later, Des Pallieres became a Centricus consultant.SoftBank’s relationship with Centricus began fraying last year, according to people familiar with the matter. Misra argued that SoftBank had no further need for the firm, as Son had developed ties of his own with MBS, the people said. And Misra had his own relationship with Al-Rumayyan, the Saudi sovereign wealth fund head. In October 2019, Misra and Son attended a party for Al-Rumayyan and MBS on a yacht in the Red Sea, people with knowledge of the event said, confirming a Wall Street Journal account.By then, SoftBank had hired Goldman Sachs Group Inc. and Cantor Fitzgerald LP to help search for new investors. Some SoftBank executives were surprised by Cantor’s involvement, as the New York-based bank had little experience sourcing investments for initiatives like the Vision Fund. But Cantor’s president since 2017 has been former Deutsche Bank co-CEO Anshu Jain, a onetime boss and childhood friend of Misra’s.The Saudis have held off committing capital to a second Vision Fund, and Son this week said he had to stop raising money because of difficulties with WeWork and other investments. SoftBank stepped in to save WeWork last year after its failed initial public offering and put Claure in charge of turning the business around. But the coronavirus pandemic has exacerbated the challenges of drawing people to co-working spaces.“Vision Fund’s results are not something to be proud of,” Son said at somber press conference in Tokyo on Monday, with reporters and analysts calling in remotely because of the pandemic. “If the results are bad, you can’t raise money from investors.”Elliott, the fund run by billionaire Paul Singer, has pressed for changes, and Misra has been involved in those talks, according to people with knowledge of the discussions. He has met frequently with Singer’s son Gordon, the people said. But two people familiar with Elliott’s operations say the firm has asked SoftBank to get to the bottom of Misra’s alleged involvement in campaigns against his colleagues and has expressed dismay at the infighting among top managers and how much of that spills into the press. A spokeswoman for Elliott denies that the company is pushing for an investigation, and a SoftBank spokesman said Son hasn’t received such a request.SoftBank’s board probed who was behind the campaigns against Arora and Sama but didn’t uncover any definitive evidence, people with knowledge of the matter said. While the company has said it’s looking into the most recent Wall Street Journal allegations, several senior executives have downplayed their significance. Ron Fisher, a SoftBank director, called the February story “another example of people anonymously spreading misinformation and innuendo about our executives,” according to an email to Vision Fund managing partners.SoftBank's board has lost several of its most independent voices in recent years, the kind of directors who could question his decisions. Shigenobu Nagamori, the outspoken founder of motor maker Nidec Corp., stepped down in 2017. Fast Retailing Co. CEO Tadashi Yanai, who had been on the board since 2001 and was a rare voice of dissent, left at the end of 2019. On the same day SoftBank announced its record losses this week, Alibaba co-founder Jack Ma announced he would leave the board too, after 13 years. Two new independent directors were nominated — Cadence Design Systems Inc. CEO Lip-Bu Tan and Waseda University professor Yuko Kawamoto.Misra’s fate is ultimately intertwined with the Vision Fund, which Son once declared would be the foundation of a new SoftBank but now risks becoming one of his worst missteps. The fund declared quarter after quarter of profit after its inception in 2017, as it marked up the value of startups and booked paper profits. But since the WeWork fiasco, it has lost all of that money and more. The structure of the fund — Misra’s invention — will create another squeeze. About $40 billion of the money raised from outside investors is in the form of preferred shares that pay about 7% a year. The idea is that SoftBank would see extra profits if the Vision Fund hit it big, but it also means losses are amplified. Venture capital funds typically don’t have such liabilities to avoid the risks of such a volatile business. Misra has been on something of a publicity tour recently to defend his reputation, although he declined to comment for this story. In an interview with CNBC published in March, he said that the Vision Fund’s mistakes are surfacing early and its portfolio will be redeemed in 18 to 24 months. “I’m so, so positive I’ll prove people wrong,” he said. He also vowed he wouldn’t leave the fund. “I owe it to my stakeholders, my LPs, my employees to be here for the journey,” he said. The Vision Fund spokesman denied Misra said the portfolio would recover that quickly. In the end, what SoftBank decides to do about Misra, if anything, depends on Son. His business is under intense pressure, putting even his deepest loyalties to the test. “At a company like SoftBank, where the founder runs the business, that person has to take responsibility for the ethics and the standards for behavior within the company,” said Parissa Haghirian, a professor of international management at Sophia University in Tokyo who specializes in Japanese corporate culture. “If you are not clear about this, then everybody sets their own rules.” For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Huawei is facing an uphill challenge in the overseas market as its upcoming devices lack the full set of Google apps and services. In an announcement on Monday, the Chinese firm announced a partnership with Vodafone to bring its smartphones to the mobile carrier's European markets. The deal kicks off in May and will sell Oppo's portfolio of advanced 5G handsets as well as value-for-money models into the U.K, Germany, the Netherlands, Spain, Portugal, Romania and Turkey.
(Bloomberg Opinion) -- These days, someone proposing a remote meeting or virtual happy hour is very likely to say, “Let’s Zoom.” While the coronavirus-induced lockdown has made Zoom Video Communications Inc. synonymous with video calls, it has also created a broader market, and whet investor appetite for stocks well placed to profit from the move to working from home. Pexip Holding ASA has satisfied some of that demand with Europe’s biggest technology initial public offering this year. The Thursday listing valued the Oslo-based company at some 9 billion Norwegian krone ($880 million) – not shabby for a business with just 370 million krone in revenue last year.The company is trading at a discount to its bigger, better-known competitor. If Pexip grows at the same pace for the rest of this year as it did in the first quarter, and profitability is consistent with previous years, then the listing gives it an enterprise value of more than 70 times forward Ebitda (a measure of a company's operating performance). Zoom is considerably pricier, with a valuation on the same basis of more than 370 times.If this were primarily a classic consumer-facing market, then investors would have to weigh up the prospect of a winner-takes-all battle. After all, that’s how things have tended to pan out for online services: Alphabet Inc.’s Google took search, Facebook Inc. dominates social media, Microsoft Corp.’s LinkedIn has professional contacts and so on. And Zoom has already entered the lexicon as a verb in much the same way as google or tweet.But the video-conferencing business model differs from those advertising-driven offerings: Most of the money is to be made from companies paying for premium services. Chief technology officers care less about what’s in vogue than about the best solution for their needs from both a technical and cost perspective. So while Pexip’s valuation is still punchy, there is room for multiple players. Concentrating on a business-to-business solution is far more likely to build a sustainable concern built on rational purchases — Pexip already boasts customers such as Vodafone Group Plc, General Electric Co. and Accenture Plc and annual recurring revenue from multi-year contracts jumped 50% in the first quarter. With 1.1 billion krone in IPO proceeds, it now has capital to accelerate that pace of growth.There’s significant demand to capitalize on the work-from-home trend. Shares in TeamViewer AG, a German maker of software that facilitates remote working, have climbed 33% this year, while the benchmark DAX Index has fallen 22%. Even at enterprise software giant SAP SE, Chief Executive Officer Christian Klein told Bloomberg News this week he’d love to have a video-conferencing solution in the company’s portfolio right now.Pexip must do a lot to justify its valuation, which prices in a huge increase in earnings over the next few years. It may be telling that many of its investors are using the offering as an opportunity to sell their stakes: The company will have a free float of some 80% of the share capital. Perhaps they’re sensing an opportunity to make hay while the sun shines. But if work from home is here to stay, then there will likely be plenty of seats around the (dining room) table.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Facebook Inc. and some of the world’s largest telecom carriers including China Mobile Ltd. are joining forces to build a giant sub-sea cable to help bring more reliable and faster internet across Africa.The cost of the project will be just under $1 billion, according to three people familiar with the project, who asking not to be identified as the budget hasn’t been made public. The 37,000-kilometer (23,000 miles) long cable -- dubbed 2Africa -- will connect Europe to the Middle East and 16 African countries, according to a statement on Thursday.The undersea cable sector is experiencing a resurgence. During the 1990s dot-com boom, phone companies spent more than $20 billion laying fiber-optic lines under the oceans. Now tech giants, led by Facebook and Alphabet Inc.’s Google, are behind about 80% of the recent investment in transatlantic cable, driven by demand for fast-data transfers used for streaming movies to social messaging.Facebook has long tried to lead the race to improve connectivity in Africa in a bid to take advantage of a young population, greater connectivity and the increasing availability and affordability of smartphones. The U.S. social-media giant attempted to launch a satellite in 2016 to beam signal around the continent, but the SpaceX rocket carrying the technology blew up on the launchpad.Google announced its own sub-sea cable connecting Europe to Africa last year, using a route down the west coast.2Africa is expected to come into operation by 2024 and will deliver more than the combined capacity of all sub-sea cables serving Africa, according to the statement. The announcement comes after internet users across more than a dozen sub-Saharan African nations experienced slow service in January after two undersea cables were damaged.Facebook has partnered on the new cable with two of Africa’s biggest wireless carriers, Johannesburg-based MTN Group Ltd. and Telecom Egypt Co. The U.K.’s Vodafone Group Plc and Paris-based Orange SA, which both have a significant presence on the continent, are also involved. Nokia Oyj’s Alcatel Submarine Networks has been appointed to build the cable.The 2Africa cable will be one of the longest in the world, trailing Sea-Me-We 3, which is 39,000 kilometers long and connects 33 countries, according to Submarine Cable Networks.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Alphabet Inc.’s Loon division signed an agreement with Vodacom Group Ltd to bring internet services to some of the most remote parts of the southeast African nation of Mozambique.Loon provides internet access to rural areas through a network of high-flying balloons linked to land-based operations overseen by a regional partner. In the coming months the companies will start the buildout, test the balloons and launch the service, a spokesman for Loon said in an email.Vodacom, based in Johannesburg, is Africa’s largest wireless carrier by value and has ambitions to expand beyond the six nations where it already operates. Loon’s balloon network is already available in Kenya, and the companies have received regulatory approval to build in Mozambique, Alastair Westgarth, chief executive officer of Loon, said in an emailed statement.Bringing fast, widespread internet to remote areas of Africa with satellites, mobile phone towers, and fiber has proven challenging for local operators. Vodacom, a unit of Britain’s Vodafone Group Plc, would like to expand the arrangement with Loon. A spokesman for the company declined to comment on the value of the contract.“This is even more pertinent in the face of the COVID-19 pandemic, where more Mozambicans will now have access to health-care information through our Loon partnership,” Vodacom CEO Shameel Joosub said via email. “We look forward to forging similar partnerships and projects across the continent.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- European stocks advanced as Vodafone Group Plc boosted telecommunication shares, while investors assessed risks from easing lockdown measures.The Stoxx Europe 600 Index rose 0.3% at the close. Telecoms led the advance among sectors, with Vodafone up 8.7% after its organic service revenue growth beat forecasts. Utilities and retailers also outperformed, while real estate and travel and leisure stocks slipped.European stocks rallied as much as 24% from a March low, before the rebound stalled in May on worries about a second wave of coronavirus cases and strained U.S.-China trade relations.Germany recorded its first increase in infections in four days as it relaxed restrictions on daily life, while China’s Wuhan, where the pandemic began, is testing its entire population after reporting new cases for the first time since its lockdown was lifted. The U.S. government’s top infectious-disease expert told a Senate hearing that “consequences could be really serious” if states ease restrictions too soon.“I think that the slower market direction you’ve seen over the last few weeks, where markets started to settle into their trading range, have led to less volumes in terms of client buying and selling,” Willem Sels, chief market strategist at HSBC Private Bank, said by phone. “It’s about remaining invested, because ultimately we see upside from here by year-end.”Among other notable stock movers, ProSiebenSat.1 Media SE jumped 13% after U.S. private equity firm KKR & Co. took a new stake in the German broadcaster, stoking speculation of a takeover by rival Mediaset SpA. ThyssenKrupp AG slid 15% as its losses deepened and debt surged.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Bucking the recent corporate trend to cut or scrap payouts, Vodafone maintained its dividend on Tuesday (May 12). The world's second-biggest mobile operator met expectations with a 2.6% rise in full-year core earnings. They reached just over $16 billion in the year to March 31st. Vodafone said data usage was surging and it was retaining more customers thanks to the reliability of its networks. The boost for data came as customers work from home and use technology to stay in contact with friends and family. But it wasn't all good news, the British company said a drop in international travel had hit revenues from roaming calls. Roaming in Europe was down by as much as 75% in April as global restrictions curbed travel. Vodafone also expects customer spending to suffer from the economic downturn, with some small business customers already requesting payment deferrals. Shares in the group, which have fallen 19% in the last 12 months, were up over 7 percent in afternoon trade. Vodafone's CEO said the firm would not change course in Britain after two of its rivals, Liberty Global's Virgin Media and Telefonica's O2, said they would merge. Vodafone has 65 million mobile contract and 25 million broadband customers in Europe.
(Bloomberg) -- Vodafone Group Plc kept its sales growing in the three months to March and pressed ahead with plans to bring in new investors for its wireless towers next year. The shares rose as much as 8.8%.Chief Executive Officer Nick Read said Vodafone’s go-it-alone strategy in the U.K. was still the right one, after rivals Liberty Global Plc and Telefonica SA announced a $39 billion merger of their British operations.The international mobile carrier reported organic service revenue growth of 1.6% in its financial fourth quarter, stronger than the 0.9% consensus of analyst estimates gathered by the company, and kept a final dividend of 4.5 euro cents.Key InsightsRead is trying to streamline the company’s operations and pay down debt after weak sales and heavy costs forced a surprise dividend cut a year ago. The coronavirus pandemic only adds to the challenge.Investors had been waiting to see if the virus might force another cut in shareholder payouts and disrupt Read’s plans to spin out the mast business, which analysts have valued at between 8 billion euros and more than 20 billion euros, depending on factors such as network sharing deals and debt.It said a separate company being created for its roughly 58,000 mobile masts was on track to sell or list a stake in early 2021, as it set out a new goal of 1 billion euros ($1.1 billion) in annual cost savings within three years.The mast sale, and sales growth, might still come unstuck. Vodafone said the economic impact of the pandemic in its markets is “likely to be significant.”“I believe the market remains structurally favorable to us,” Read told reporters on a call.Market ReactionVodafone shares were up 7.8% as of 10:03 a.m. in London, continuing a recovery that began in mid-March when they fell below 1 pound per share to a 23-year low. Until Tuesday’s bounce, the shares have been underperforming their industry peers this year.Of analysts surveyed by Bloomberg, 19 rated the stock a Buy, 5 a Hold and 2 a Sell.Get More“We are preparing for a potential IPO in early calendar 2021, and we are targeting to provide financial information at our interim results in November 2020,” the Newbury, England-based company said in its results statement Tuesday.Organic sales in Italy, Vodafone’s first major market to be hit by the virus, slid 3.7% in the quarter, slightly better than the 4.6% drop forecast by analysts. Spain fell 2.7%, beating the 5.5% forecast decline.The company also revealed writedowns of 1.7 billion euros for the year at its Spanish, Irish, Romanian and automotive units, citing competition in Spain and the economic turbulence caused by Covid-19.StatementNOTE: Vodafone cashflow could benefit from deferral of 5G spectrum auctions: BINOTE, May 7: Telefonica COO Says CTIL Could Still Be ‘Monetized’(Adds more on tower unit in second key insight, opening share gain)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The blue-chip FTSE 100 <.FTSE> gained 0.5%, with Vodafone <VOD.L>, the world's second largest mobile operator, jumping 6.3% to the top of the index after meeting full-year profit expectations and saying it was seeing significant increases in data volumes. "It's a market of two extremes: a, saying the market has run ahead of fundamentals, and b, we've got unprecedented amounts of stimulus," said Max Kettner, multi-asset strategist at HSBC Global Research. After rallying in April on historic global stimulus and hopes of a pick up in business activity, the FTSE 100 has struggled to build on its gains in May as countries such as Germany and South Korea report a surge in COVID-19 infections after easing lockdowns.
Vodafone <VOD.L> maintained its dividend on Tuesday, bucking a corporate trend to cut or scrap payouts due to the coronavirus crisis, as the world's second-biggest mobile operator met expectations with a 2.6% rise in full-year core earnings. Chief Executive Nick Read said the company had delivered a "rapid, comprehensive and coordinated" response to the crisis. Core earnings reached 14.9 billion euros (13.07 billion pounds)in the year ended March 31, with group revenue up 3% to 45.0 billion euros, driven by business in Europe.
(Bloomberg) -- Telefonica SA and Liberty Global Plc have agreed to create the U.K.’s largest phone and internet operator, threatening their rivals and marking another industry-defining deal for billionaire John Malone.The deal values the combination of Telefonica’s O2 with Liberty’s Virgin Media at 31.4 billion pounds ($39 billion). The companies said in a statement Thursday they plan a joint venture with equal stakes that will account for Virgin’s higher value -- and debt load -- with a payment to O2.The transaction, first reported by Bloomberg, is a chance for both parent companies to rework two mid-tier rivals into a fully-fledged competitor to BT Group Plc in so called converged services, which combine fixed and wireless phone, broadband and television. It is also one of the largest deals since Covid-19 was declared a pandemic in early March.Telefonica’s shares rose as much as 4.4% as the announcement overshadowed mixed earnings before swinging to a loss, while BT revealed that it is canceling its dividend payments until 2021, causing shares to fall over 11%. Liberty was up as much as 12% after reporting steady sales late Wednesday before pulling back.The transaction values O2 at 12.7 billion pounds and Virgin at about 18.7 billion pounds. The Spanish parent has been weighed down by about 38 billion euros ($41 billion) of borrowing. The arrival of new funds, including a 2.5 billion-pound equalization payment, could give its deleveraging efforts a boost, Bloomberg Intelligence analyst Erhan Gurses said in a note.Each company will name half of the 8-member board, which will have a chairman who will rotate every two years. The deal is set to be completed in mid-2021.The announcement is the latest deal for John Malone, Liberty’s billionaire chairman, who has been on a relentless M&A spree since selling cable provider Tele-Communications Inc. to AT&T Inc. for $48 billion in 1999. His track record took a knock late last year when his effort to sell UPC Switzerland for $6.4 billion fell apart.For Telefonica Chairman Jose Maria Alvarez-Pallete, it’s also an opportunity to signal to investors he’s committed to restructuring the debt-laden company.Investors have punished Telefonica stock since Pallete became chairman four years ago, as the Madrid-based company failed to deliver clear prospects for growth and cutting debt. The shares are down by about 31% so far this year, even after he introduced in November a strategy to focus on Spain, Brazil, the U.K. and Germany, which generate the bulk of sales, and place other Latin America activities into a separate division.Key TermsO2 will be debt-free, while Virgin Media comes with 11.3 billion pounds of net debtAny cash flow generation and financing needs will be divided equally between Telefonica and Liberty GlobalThe new unit will service over 46 million video, broadband and mobile subscribersBanks have underwritten 4 billion pounds for financing for O2 businessThe companies have yet to announce who will lead the new unit, with the board equally split, and the chairman to rotate every two years, first going to Liberty Global CEO Mike Fries.Both sides will have the right to kick off an IPO three years after the deal closesBy joining with Liberty in the U.K., Telefonica puts Vodafone Group Plc in a difficult position. It deprives it of a potential partner which could have set it on the road to offering consumers fixed-line services wrapped into lucrative bundles at a national scale. And Virgin will no longer need to pay it for mobile wholesale access. That’s something Liberty would have needed to keep doing to capture potential new revenue streams from the next generation of wireless technology, such as the proliferation of smart devices. Analysts have not ruled out a fightback from the Newbury, England-based carrier.While a potential IPO could provide “transparency” on the value of the new venture, the two companies aren’t “entering the deal with the idea of leaving,” Fries said in a conference call Thursday. He added the transaction is a huge vote of confidence in the U.K., in spite of the uncertainties surrounding Brexit, which will “occur, and everyone will manage their way through it.”Liberty was advised by JPMorgan Chase & Co. and LionTree Advisors LLC while Telefonica worked with Citigroup Inc.The tie-up comes at a crucial moment for Virgin. Rival BT is the only U.K. operator to own both a mobile and fixed network, and it’s been investing to upgrade to fiber optic broadband. This threatens one of Virgin’s key selling points -- the speed of its internet services. It also gets a partner with significant experience in convergence and building and operating fiber networks.The merger means O2 can grow beyond the mobile-only market in which it currently operates.Speaking in an earnings call Thursday, BT CEO Philip Jansen said the deal wasn’t a surprise. “Personally I think the industry needs consolidation,” he said.Telefonica was one of the first European carriers to make the shift to convergence: offering fixed- and mobile-phone services, along with broadband and television. The company is also Europe’s leading operator of fiber-optic broadband, a crucial type of infrastructure which the U.K. is still struggling to roll out.But it hasn’t always been able to take a leading market position with this know-how. In 2018 it was left as a mobile-only carrier in Germany, reliant on buying wholesale access from rivals in order to offer fixed and broadband services, after Liberty sold its cable business there to Vodafone.“We think this deal will trigger a ripple effect on the U.K. market,” said Kester Mann, analyst at CCS Insight. “Vodafone, Three, Sky and TalkTalk will all be assessing their positions and further deal-making can’t be ruled out.”(Updates with Liberty shares in fifth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
May.07 -- Telefonica SA and Liberty Global Plc. have agreed to create the U.K.’s largest phone and internet operator. The deal values the new company, combining Virgin Media and O2 at $31 billion pounds. The joint venture is set to pose a challenge to the dominance of BT in converged services. Bloomberg Intelligence’s Matthew Bloxham discusses the merger on “Bloomberg Markets: European Open.”
(Bloomberg) -- Combining O2, the U.K.’s largest mobile phone operator, with Virgin Media, the nation’s second-largest broadband provider, could reshape the market for consumers as much as the telecommunications industry.A tie-up between the U.K. broadband and mobile units of Liberty Global Plc and Telefonica SA, could be announced as soon as this week, and both companies offer a roster of perks and offers to tempt customers, many of which they’re uniquely positioned to offer -- and with minimal existing crossover.Live StreamingO2 is a pure-play wireless carrier with no TV product of its own, so it bundles services like Amazon Prime Video into new contracts. Conversely, Virgin Media gives its TV subscribers free mobile apps that let them stream live and on-demand channels, but incentives to use them on a Virgin Mobile service -- such as having their data usage being excluded from a customer’s monthly allowance -- don’t exist.There would be ample opportunity for Virgin to offer an on-demand TV streaming mobile product that, if used on an O2 phone, didn’t eat into a customer’s data allowance. It’s a strategy already used by rival EE -- customers of that carrier can choose a service plan that excludes TV services such as the BBC and Netflix Inc. from using up bundled data allowances.Fiber PromotionSwathes of British households don’t currently get their mobile phone from the same provider as their TV or broadband, which is often the best way to get the cheapest deals, so it opens up an opportunity for cost-savings (for consumers) and market growth (for providers).Bloomberg Intelligence estimates that 6.5 million U.K. broadband homes use O2’s mobile services, of which about 3.5 million may fall within Virgin Media’s footprint. “A merger would provide an opportunity to target about 2.2 million homes not already using Virgin Media to switch to the cable operator’s broadband platform,” BI analyst Matthew Bloxham said in a note.5GStill, despite selling some of the fastest broadband widely available in the U.K., Virgin’s mobile product only offers 4G speeds. To get a next-generation 5G connection, customers need to go to one of its competitors. The company said in November it had inked a deal with Vodafone Group Plc to start selling a 5G product, but that’s not expected to arrive until 2021.A merger with O2 could change that. The carrier has already started to roll out 5G phones with unlimited data plans ripe for use with high-definition television and movie streaming, alongside competitors. Having these as incentives to bring a Virgin Media broadband and TV customer in-house from a mobile rival wouldn’t be hard to justify building into a combined package.Live EventsFor more than a decade, O2 has used the concerts and performances held in its London arena and other smaller venues around the U.K. as ways to attract customers. The network gives them pre-sale access to tickets for thousands of shows, which have included sell-out names such as Fleetwood Mac, Lewis Capaldi, and Rod Stewart.Extending such offers to Virgin Media customers could benefit them, as well as any O2-branded venues with seats to fill in post-pandemic Britain, when mass gatherings are likely to be challenging to coordinate. In the past, some performances at the O2 Arena in London have been so popular they’ve been commercially live-streamed to cinemas elsewhere in the country. Such programs could be effectively extended to millions of Virgin Media TV customers in their homes -- an effective way of bolstering the live events industry while maintaining social distancing.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The prospect of Britain’s biggest telecommunications deal in five years is threatening Vodafone Group Plc in its backyard, prompting speculation it could counterattack. A tie-up between Virgin Media and O2, the U.K. broadband and mobile units of Liberty Global Plc and Telefonica SA, could be announced as soon as this week, according to people familiar with the matter. That leaves Vodafone -- viewed previously as a strong alternative partner for Virgin Media -- looking isolated. Virgin Media is the only serious challenger to former monopoly BT Group Plc in fixed-line infrastructure. So a Virgin deal would be Vodafone’s sole opportunity to seize a place in the landline market and offer customers more lucrative bundles of mobile, broadband and TV at a national scale. Vodafone has already extolled the benefits of being a converged fixed-and-wireless operator in its other markets such as Germany. “The Vodafone management team will have some difficult decisions to make in short order,” said HSBC analysts led by Adam Fox-Rumley in a note. Vodafone and Liberty also have a history of close deal-making. The U.K.-based global wireless operator bought Liberty’s German and eastern European operations for 18.4 billion euros ($19.9 billion) last year. The two have a Dutch joint venture, VodafoneZiggo, that looks almost like a template for the emerging terms of Liberty’s U.K. deal.Liberty also jumped to Vodafone’s wireless network from BT’s to resell its own-brand U.K. mobile services in November.The risk to Vodafone from a Virgin-O2 deal looks so great that some observers are speculating the Liberty-O2 talks are a tactic by Liberty’s deal-savvy Chief Executive Officer Mike Fries to sweeten the terms of the Vodafone deal he may really want.“This story that Virgin Media is in discussions with O2 UK could still just be a ploy to try to flush out a deal with Vodafone and to set up a Dutch auction,” said New Street Research analyst James Ratzer. “In any deal with O2 UK, Vodafone would be the big potential loser here.”Vodafone declined to comment.Regulator RiskVirgin’s cable and fiber connections reach about half of Britain’s homes, making it by far the biggest fixed-connection rival to BT, some way ahead of a flurry of fiber businesses such as CityFibre Ltd. that are vying to become a serious third-placed contender.All the more reason for Telefonica Chairman Jose Maria Alvarez-Pallete to make sure a Liberty deal doesn’t slip through his fingers. British and European regulators united to block his last attempt to sell O2 to CK Hutchison Holdings Ltd.’s unit Three in 2016, weeks before the U.K. voted to leave the EU.This had a chilling effect on telecom industry consolidation across Europe as regulators took a dim view of linking up networks at the risk of increasing prices.A deal allowing Virgin Media and O2 to leapfrog BT to become the biggest U.K. telecom operator stands a better chance of being approved by regulators, if past interventions are anything to go by.A potential Virgin-O2 tie-up wouldn’t reduce the number of competitors in the U.K. mobile market from four to three. Neither did BT’s 12.5 billion-pound acquisition of wireless unit EE, which was waved through by antitrust officials.What’s more, the coronavirus pandemic is forcing millions of people to rely more on telecommunications, strengthening the argument for allowing suppliers to merge so they can invest more in networks. U.K. or EU?While company revenues would usually require a deal review by the European Union’s merger watchdog, even during the Brexit transition period, the U.K.’s Competition and Markets Authority could ask to take over a probe. Germany has repeatedly failed to win back telecom reviews but Britain’s imminent departure from the bloc may make it hard for the EU to refuse.That would also set up a test for Melanie Dawes, the new chief executive officer of British communications watchdog Ofcom, who started in the role in March and is yet to have such a big deal pass her desk.Legal issues could still complicate a deal as Telefonica has set up a challenge to the U.K.’s pending 5G spectrum auction. That could create uncertainty about O2’s value as it’s unclear how much money Telefonica will have to pay for 5G airwaves and what it would own. Telefonica had previously planned an initial public offering for O2, which it said couldn’t happen until after Britain’s previous spectrum auction.Another potential point of conflict is Virgin Media’s agreement to shift its virtual mobile service to Vodafone’s network next year.New Street analyst Ratzer said there’s probably a break fee for Virgin to exit the deal with Vodafone, but it shouldn’t prove a stumbling block.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Do you remember 5G? Before the coronavirus consumed all of our attention, the fifth-generation mobile networks were supposed to be the panacea for lagging economies, telecoms firms, keeping pace with China, autonomous cars, smart factories and plenty more besides.Overhyped? Maybe. But 5G will still be an economic boon. And perhaps inevitably, Covid-19 has collided with the rollout of the new technology, which ultimately depends on four ingredients: popular acceptance and adoption; the ability to install the equipment; access to capital; and the availability of spectrum — the radio frequencies used to transmit the signal that will allow vast gobs of data to be transmitted at lightning speeds.For now, telecoms companies insist the pandemic will only delay the rollout by several months. That may be optimistic. Problems with any one of the four factors above could throw things off course, and the current environment has elevated that likelihood. Given their role in dividing up the spectrum and auctioning it, governments have a particular responsibility to ensure they don’t hold up the process any more than is necessary.Much has been made of the conspiracy theories falsely suggesting 5G contributed to, or even caused, the virus’s spread. They prompted the gloriously terse response from the U.K.’s telecommunications regulator Ofcom: “This is wrong. There is no scientific basis or credible evidence for these claims.”The falsehoods may still permeate public opinion. Research suggests that even if people don’t believe conspiracy theories per se, they can nonetheless influence their views. So an underlying fear, however unwarranted, could persist that 5G is somehow detrimental to one’s health. That could perpetuate popular opposition to the necessary proliferation of new antennas.The virus has already disrupted the global supply chain, making it harder to source gear from China in particular. Telecoms equipment maker Nokia Oyj said that such interruptions shaved 200 million euros ($218 million) from revenue in the first quarter, and they continue to be a risk. Lockdowns are also making it harder to install that equipment. Orange SA Chief Financial Officer Ramon Fernandez said last week that fiber deployment — whose wires connect not just homes but the antennas — will be delayed by the virus.Telecoms operators are changing how they spend their money, too. The surge in people working from home has put huge pressure on their existing setup. That means operators are having to reallocate capital in the short term toward making sure their fixed networks are reliable, rather than working to upgrade and install everything that’s needed for the next generation of mobile services.Even with all that, Nokia CEO Rajeev Suri told me that he expects the delay will probably only be a “couple of months,” echoing comments from his peer at rival Ericsson AB, Borje Ekholm. Perhaps the biggest risk to a fast rollout is the availability of spectrum, which is where governments come in. They dedicate a particular tranche of frequencies to 5G and then auction it off. A slew of those sales have been put on the back burner by the pandemic. While Germany and Italy have all but finished theirs, other countries, including France, the U.K. and Spain, are unlikely to auction frequencies until later this year.With national budgets stretched by efforts to counter the impact of the virus, there will be a temptation to milk those auctions for all they’re worth. That could create a pinch on companies’ finances that makes rolling out the new networks even harder. Italy managed to squeeze 6.2 billion euros out of its telecoms firms back in 2018; Germany wrung 6.6 billion euros from Deutsche Telekom AG, Vodafone Group Plc, Telefonica Deutschland AG and 1&1 Drillisch AG. Economists generally classify networks as “productive” government investments, because they contribute positively to long-term economic output. It would be better for states to foster their new 5G networks by not overcharging for them. Otherwise they risk ceding more ground to China in the race for adoption. In return for more generous auction terms, it would be fair for governments to request an accelerated rollout.The virus is already reaping havoc on vast tracts of the economy. Best not to let it damage any more growth.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Telefonica SA and John Malone’s Liberty Global Plc have never been closer to finally creating the U.K.’s biggest telecom operator after flirting with various combinations over the years.Racing for a potential announcement as early as this week, talks hinge in part on striking equal control for the merger of O2 and Virgin Media, while structuring a deal that’ll help the Spanish giant pay down its huge debt pile, according to people familiar with the matter, asking not to be identified because the talks are private.In a statement Monday, Telefonica confirmed that talks are ongoing “on a potential integration of their respective telecommunications businesses in the United Kingdom” and there is no guarantee that an agreement can be reached.Liberty Global’s New York A-class shares surged 15% on Friday after Bloomberg revealed the talks, the biggest jump since 2009, and were up 6% in premarket trading Monday to $23.62. Telefonica shares rose 4.2% at 2:41 p.m. Madrid time Monday, while rival BT Group Plc rose 1.1%, rebounding from a drop earlier in the day.Clinching a deal this month amid a collapse in global deal-making would be no small feat. A combination of O2 and Virgin Media could create a business with an estimated enterprise value of about $30 billion, according to analysts at Goldman Sachs Group Inc., which could make it the largest deal struck since the coronavirus was declared a global pandemic.Telefonica may seek a payment from Liberty Global of between 6.2 billion euros ($6.8 billion) and 8.5 billion euros, an amount which may keep its leverage ratio from climbing from pre-deal levels, Deutsche Bank analysts Keval Khiroya and Robert Grindle said in a note to clients. They see 6 billion pounds ($7.5 billion) of synergies, and value O2 at 11 billion pounds and Virgin Media at 16 billion pounds.Telefonica, currently trading at close to a 25-year-low, is demanding the two companies have equal voting rights in the new venture, one of the people said. Executives and advisers must reconcile that with Telefonica’s need to pay down 38 billion euros of debt, which means it’s unlikely to put cash into the deal, said analysts at New Street Research.Liberty is likely to make a significant cash payment to Telefonica as part of the transaction, two of the people said.Although the talks are advanced, executives on both sides are being cautious following recent strategic upsets, the people said. Telefonica’s plan to sell its U.K. business to CK Hutchison Holdings Ltd. was blocked by regulators in May 2016. It then started working on plans for an initial public offering of O2, but they were shelved by Brexit and the subsequent market turmoil. The company never said officially that it was scrapping the IPO plans.Liberty Global declined to comment.New RivalsLiberty Global Chief Executive Officer Mike Fries said in September that buying a U.K. mobile operator would bring hundreds of millions of dollars in synergies. Extra cash would flow from combining infrastructure and back-office savings, and eliminating the need to pay for access to networks they don’t own.Previous joint ventures have cut costs such as Liberty Global’s 2016 deal with Vodafone Group Plc in the Netherlands. As of February that partnership was yielding 85% of a planned 210 million euros in synergies, a year ahead of schedule.The combined entities would take 34% of Britain’s telecom service revenues between them, eclipsing the current No. 1 operator BT Group Plc, according to research from Goldman Sachs published Friday. If successful, the new venture would be BT’s only rival that owns both fixed-line and mobile services.BT’s leading position in the U.K. communications market would be threatened by a merger of rivals O2 and Virgin Media, we believe. A second, scaled fixed-mobile carrier would pressure BT’s consumer-broadband and enterprise-mobile market share, and boost investment in alternative full-fiber infrastructure to rival Openreach’s own expansion plans.\-- Matthew Bloxham, BI telecom analystVodafone and Liberty Global’s close relationship -- solidified by their Dutch joint venture -- has previously fueled speculation that the two groups could do a U.K. deal. Vodafone recently won BT’s contract to wholesale mobile services to Liberty’s U.K. customers, a deal which would have to be re-examined if Virgin merged with O2.“Vodafone would be the big potential loser” from a Virgin-O2 match-up, said New Street analyst James Ratzer in a note Friday, adding they would miss out on the synergies and also lose wholesale payments from Virgin.Musical ChairsMatchmaking the U.K.’s fixed and mobile operators has been a favorite game of bankers and executives for years as Britain lagged neighbors in a global telecommunication trend of “convergence,” which has seen companies meld cable and radio networks together. A wave of investors are being drawn to the infrastructure-like returns of fiber optics. Startups are also building U.K. fiber and consolidating.Executives at the leading U.K. telecom companies have regularly spoken about potential combinations, with advisers pitching Virgin Media as a partner to both Vodafone and Comcast Corp.’s Sky unit, in addition to Telefonica, people familiar with the talks said.Liberty’s investors have been waiting to learn what the company plans to do with what remains of $11 billion in proceeds from selling its Germany and eastern European operations. In November, Liberty’s Chief Financial Officer Charlie Bracken said the company is looking at the merits of listing local units to unlock more value, as the company’s stock price has wilted.While Telefonica has never publicly said it wanted to move into the U.K.’s fixed market, it has always advocated for consolidation in its markets, and internally the company has been open to considering options for the U.K. O2 was born as a joint venture controlled by BT called ‘Cellnet’, before it was bought by Telefonica in 2006 for 18 billion pounds. BT looked at buying O2 in 2014 but opted instead to buy EE, the joint venture built by Deutsche Telekom AG and Orange SA.For Telefonica, a U.K. merger would advance a sweeping strategy change announced in November. It’s focusing on four core markets of Spain, Brazil, the U.K. and Germany and considering all options for the rest of its Latin American units. It also announced the creation of new tech and infrastructure units. It’s looking for ways to accelerate growth in those core markets and the latter new divisions through partnerships and deals.(Updates share prices in fourth paragraph, adds analyst comment in sixth paragraph, detail on O2 history in ninth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.