Vodafone has done a deal with Hutchison allowing it to buy Australian mobile operator C&W Optus.
Mobile operator Vodafone and telecoms group Hutchison today unveiled a deal which will see Vodafone bidding an estimated $9-14 billion for number two Australian operator Cable & Wireless Optus. A deal involving Vodafone has been expected since Optus’ parent company Cable & Wireless put the telco up for sale. However, Vodafone already has an Australian subsidiary, the number three operator with 18% market share, so the deal was expected to run into regulatory problems. The deal with new entrant Hutchison should help get round these.
It looks like an excellent move for all concerned. Vodafone can use its shares, still relatively expensive despite the crash in telecoms stocks, to buy Optus’ consumer operations and then sell the non-mobile business. It will then also sell one million customers and some network infrastructure to Hutchison, satisfying the regulator but still ending up with 41% market share. When the deal is complete, Vodafone should be able to put up a fierce challenge to dominant operator Telstra, boosting its Australian presence to the heady levels it enjoys elsewhere.
Cable and Wireless can keep Optus’ data and business services operations, fitting in with its strategy of becoming an Internet solutions company, as well as getting a hefty sum in Vodafone shares. These should hold their value rather better than the Pacific Century CyberWorks shares C&W received for its Hong Kong Telecom stake. The payment will help allow the company to invest in markets such as Japan, where it is building a national broadband network.
But it’s best of all for Hutchison. It will benefit from the reduction of the number of operators, as well as increasing its market share from under 5% to over 10%. The company has also wisely retained Asian rights to the well-recognized and respected Orange brand, so should benefit from France Telecom’s marketing success as well as its own. Some of Hutchison’s key personnel were responsible for building Orange UK up from scratch to become a major player – maybe now it can repeat the same trick down under. Telstra, meanwhile, cannot be best pleased.
