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GLOBAL
TELECOMS
BUSINESS
CFO NEWSLETTER
ISSUE 2 — JULY 2014
A EUROMONEY INSTITUTIONAL INVESTOR
PUBLICATION
FINANCE NEWS
2
2
2
3
3
3
LightSquared agrees with Charles Ergen on
new restructuring plan
Vodafone and Wind challenge OTE in bids
for Greek operator
Nortel Networks to pay $1bn interest to US
bondholders on debt
KDDI to compete with Ooredoo and Telenor
in Myanmar
Helios Towers buys 3,100 Airtel towers and
signs Vodacom
Vodafone to invest $1.3bn in Egypt as
incumbent given year to sell stake
DEALS
4
4
4
4
5
DirecTV takeover means Slim will buy AT&T
stake for $5.6 billion
TeliaSonera to buy Tele2 Norway for $744 m
Vodafone sells stake in Fiji unit for $87 m
Portugal Telecom stake in Oi to fall to 25%
after debtor defaults
A roundup of the latest deals
ASSET SALES
6
Telecoms reform ‘can be positive’ says
América Móvil CFO
RISK
7
Telcos avoiding EU and US sanctions on
Russian companies, but risks remain
FIXED-MOBILE INTEGRATION
8
Substantial synergies in fixed-mobile M&As
but they are not easy to quantify or realise
INVESTMENT
10 Attractive opportunities for the experienced
emerging markets investor
WHOLESALE
11 Industry challenges present significant long
term opportunities for leaders
MERGERS
12 Numericable deal ‘will create powerful rival
to Orange’, says SFR’s Jean-Yves Charlier
FINANCE NEWS
Bell Canada to spend $3.7bn
on rest of Bell Aliant
B
ell Canada Enterprises has
capacity to keep increasing
agreed to buy the 56% of
dividend payments to
shares in rural operator Bell
shareholders.
Aliant that it doesn’t already
Some of the savings will
own for C$3.95 billion ($3.68
come from job cuts, Bell
billion) in cash and stock. The
Aliant CEO Karen Sheriff
deal is expected to lead to
is reported to have told
annual savings of about C$100
Canadian media.
million and increase free cash
The deal is regarded as a
flow by about C$200 million a
privatisation. Siim Vanaselja,
year after paying dividends.
the CFO of BCE, said:
Bell Aliant operates networks
“Privatising Bell Aliant
Bell Aliant CEO Karen Sheriff:
on the east coast of Canada,
within BCE supports our
Job cuts expected from
including networks that were
dividend growth model and
privatisation
once part of Bell Canada.
capital investment strategies,
The long-expected deal to consolidate
while maintaining a strong balance sheet
Bell Aliant into BCE is set to help cut
and strong investment-grade credit ratings
costs and boost earnings, giving BCE more
with significant financial flexibility.” n
Telefónica to halve Telecom
Italia stake to 7%
S
pain’s Telefónica is to cut
through a holding company,
its stake in Telecom Italia
Telco. That group, which
through a sale of bonds that
included Italian insurer
will be exchanged into shares
Assicurazioni Generali,
in the Italian operator.
Mediobanca and Intesa
The Spanish company said
Sanpaolo was dissolved (GTB
in a filing that it would issue
CFO Newsletter, June 2014).
bonds with a nominal value
Telefónica and Telecom
of €750 million for sale to
Italia both have competing
institutional investors. The
assets in Brazil and the
sale would reduce Telefónica’s
country’s antitrust regulator
stake in Telecom Italia to
has told Telefónica to get rid
Sale of Telefónica bonds worth
about 7%, from 14% now.
of either its stake in Telecom
€750m will cut stake in Telecom
For years Telefónica
Italia or its other Brazilian
Italia
was part of a group of
asset, Vivo. Telecom
shareholders that together held a
Italia operates in Brazil through TIM
controlling 22.4% stake in Telecom Italia
Participações. n
PROCUREMENT
13 Telekom Austria group saves €90m with
better procurement initiative
PEOPLE
14 Dutch politician to become CFO of KPN
PROFILE
15 New challenges ahead for CFO as Interoute
board lines up €200m fund for acquisitions
ANALYSTS
16 Turkish bank wins top score in rating of
mobile banking apps
save
print
WWW.GLOBALTELECOMSBUSINESS.COM
Private equity to sell and buy operators
P
rivate-equity firm KKR is considering
the sale of German operator Versatel.
At the same time Providence Equity
Partners is considering acquiring a stake
in Canadian operator Wind Mobile, as
Canada continues its effort to create a
fourth national operator.
If KKR proceeds with a sale,
Düsseldorf-based Versatel could attract
Vodafone or Telefónica because of its
fibre network, which passes 53,000
kilometres across German, said observers.
KKR bought Versatel for about €240
million in 2011.
Providence could provide Wind Mobile
with the backing needed to acquire
spectrum so it can expand. The Canadian
government has been pushing for another
national provider, saying the best way to
reduce wireless rates and improve service
is through added competition with Rogers,
BCE and Telus. n
GTB CFO NEWSLETTER JULY 2014
1
➧
FINANCE NEWS: RESTRUCTURING
LightSquared agrees with Charles Nortel
to
Ergen on new restructuring plan Networks
pay $1bn
B
ankrupt US operator
LightSquared has reached
an accord with Dish Network
chairman Charles Ergen over
more than $1 billion in debt he
holds in the company, taking it
one step closer to exiting court
protection.
The deal with Ergen, which
has yet to be completed, “will
alleviate a significant burden
and execution risk around the
plan,” said Joshua Sussberg, a
lawyer for a special committee
of LightSquared.
LightSquared, originally
backed by Philip Falcone’s
Harbinger Capital Partners,
planned to set up a wireless
broadband network, carried by
satellites and terrestrial base
stations, to reach rural parts
of the US.
Charles Ergen: $1 billion will roll into
new loan for LightSquared
Harbinger fought against
an earlier plan to restructure
the company, accusing Ergen
and Dish of using “improper
tactics” while trying to obtain
LightSquared’s spectrum.
The new agreement will
replace a planned $1.3 billion
in funding for the company’s
bankruptcy exit that JP Morgan
Chase was to raise in the
marketplace, Sussberg said.
Under the new plan, Ergen
will get $1 billion. When the
company exits bankruptcy, that
would roll into a new loan for the
company, and Ergen will provide
an additional $300 million in
financing, Sussberg said.
The LightSquared project
ran into difficulties because
many GPS receivers can pick up
signals in the satellite spectrum
that the company planned to
use. Harbinger is suing the US
regulator over refusal to approve
the company’s service. n
Vodafone and Wind challenge OTE in
bids for Greek operator
L
oss-making Greek ISP and
subscription TV provider
Forthnet has received a joint
takeover bid from Vodafone
and the Greek mobile operator
Wind Hellas, which have a
network sharing agreement.
Rival operator OTE has
also bid up to €300 million
to buy Forthnet’s main asset,
subscription TV operation
Nova.
Vodafone and private equityowned Wind, which already own
about 39% of Forthnet, have
made a non-binding offer for
other 61% of the shares, offering
between €1.70 and €1.90,
Forthnet said in a filing. That
would value Forthnet at between
€187 and €209 million.
Forthnet has reported
net losses for the past
nine years, according to
Thomson Reuters Eikon
data. Its biggest shareholder
is Etisalat, the Emirates
➧
interest to US
bondholders
on debt
T
he US unit of defunct
Canadian equipment vendor
Nortel Networks has agreed
to pay up to about $1 billion
in interest that has accrued on
the $3.9 billion it owes its US
bondholders.
The settlement comes as
Nortel’s bankrupt units in
Canada and Europe are fighting
with the US unit over how to
divide the $7.3 billion raised by
liquidating the company, which
filed for bankruptcy protection
in early 2009.
Any funds that are left over
in Nortel’s US bankruptcy after
paying off the bondholders
and other US creditors could
be used to help to make
up for pension shortfalls in
Canada and the UK. Nortel
pensioners are arguing that
the bondholders should get
$90 million in interest, or no
interest at all.
When Nortel was broken up
after the bankruptcy, companies
such as Avaya, Ciena, Ericsson
and Genband paid substantial
sums for the remaining
businesses, and a consortium
of five companies bought the
intellectual property for $4.5
billion, but it was never decided
how to allocate the money raised
between different countries. n
GTB CFO Newsletter is published by
Global Telecoms Business
Editor: Alan Burkitt-Gray
+44 20 7779 8518
[email protected]
Publisher: Laurence Mackintosh
+44 20 7779 8589
[email protected]
Vodafone/Wind Hellas have bid up to €209m, but OTE’s bid is up to €300m
telecommunications operator,
which has a 44% stake.
Vodafone tried but failed
in 2012 to merge with Wind
Hellas, which is no longer
connected with Wind in Italy
or Canada. Wind Hellas
was restructured in 2010
and taken over by bond
holders, but has retained the
name. Vodafone and Wind
Hellas subsequently struck a
network-sharing agreement
last year to save costs. n
contents page
Graphic design: Tina Eldred
+44 7540 972 442
[email protected]
Divisional director: Roger Davies
+44 20 7779 8530
[email protected]
http://tinyurl.com/GTB-CFOLink
Nestor House, Playhouse Yard,
London EC4V 5EX, UK
©Euromoney Institutional Investor 2014
Global Telecoms Business™
2
➧
FINANCE NEWS: INVESTMENT
KDDI to compete with Ooredoo
and Telenor in Myanmar
J
apanese operator KDDI and
trading company Sumitomo
have stepped into the Myanmar
— or Burma — market in
competition with Ooredoo and
Telenor, which last year won
licences from the government
to set up new commercial
mobile operations.
The Japanese companies
are working with government
telecoms operator Myanmar
Posts and Telecommunications,
which already has a small
mobile operation. Under the
military regime Myanmar has
been one of the world’s leastconnected countries.
“Myanmar is experiencing
a rapid move towards
democracy and the market in
mobile phones and fixed line
communications is expected
to grow dramatically in the
future,” said Takashi Tanaka,
president of KDDI. “KDDI
will provide the same level
of Japanese-quality services
to Myanmar and contribute
KDDI’s Takashi Tanaka: We will
provide Japanese-quality services to
Myanmar
to the country’s growth and
development.”
KDDI and Sumitomo
will invest $2 billion in
infrastructure and jointly
operate mobile and broadband
services with MPT.
MPT will split earnings
from the Myanmar operations
roughly equally with a
Singapore-based joint venture
of the Japanese firms that
will be formed in August,
Sumitomo executive vice
president Shinichi Sasaki said.
“We’ll be able to reach
profitability in a short period
of time,” KDDI senior vice
president Yuzo Ishikawa said.
In January, Sumitomo’s
deputy general manager in
Myanmar, Soe Kyu, told
Reuters the companies were
jointly invited to exclusive
talks about becoming the
international partner of MPT,
which is an operator as well
as the industry regulator. The
government plans to create
a new regulator by 2015 and
divest a minority share in
MPT, which will remain one
of four licensed operators.
State-backed Yatanarpon,
until now primarily an
internet service provider, also
holds a licence.
Telenor of Norway and
Qatar’s Ooredoo won hotly
contested bids for two new
licences in June 2013 and are
now building their networks. n
Helios Towers buys 3,100 Airtel
towers and signs Vodacom
B
harti Airtel is to sell more
than 20% of its telecoms
tower portfolio in Africa to
Helios Towers Africa, as part
of its overall strategy to sell its
15,000 towers to independent
tower companies.
Meanwhile Airtel’s operation
in Tanzania has joined its main
rival Vodacom Tanzania in a
tower sharing deal that provides
it with full access to towers
from HTA.
Airtel has been trying to sell its
tower portfolio for the past year
and sources have told Indian
media that the deal for all the
towers could be worth between
$2.5 billion to $3 billion.
Under the deal, Airtel will
have full access to the towers
from HTA under a long term
➧
lease contract and employees
of its tower operations will be
transferred from Airtel to HTA.
Airtel said the deal will
help drive in efficiencies as
HTA, being solely focused
on providing telecoms
infrastructure, would help
in reducing operating cost,
preserving capital and
reducing the proliferation of
towers.
The main deal covers
towers spread across four
of the 17 African nations
where Airtel operates.
The Tanzania partnership
involves the transfer of 1,149
existing telecoms towers from
Vodacom. This means HTA
has acquired all of Vodacom’s
existing passive infrastructure
Airtel’s deal with HTA is thought to be
worth up to $3bn
and supplies Vodacom with a
significant increase in points of
service in Tanzania. n
contents page
Vodafone to
invest $1.3bn
in Egypt as
incumbent
given year to
sell stake
Ahmed Essam: Vodafone Egypt will
finance investment from existing
funds
V
odafone Egypt will invest
around $1.3 billion over the
next three years to improve
its majority-owned network.
The operator will finance the
plan from existing funds, CEO
Ahmed Essam said.
Vodafone Egypt, which is
still 45% owned by Telecom
Egypt, is the leading operator
by customer numbers in the
country.
Egypt is issuing unified
licences which will allow
firms to offer both mobile
and landline services. Telecom
Egypt’s CEO Mohammed
Elnawawy told Global Telecoms
Business earlier this year that he
expects to offer mobile services
and that the relationship with
Vodafone will end.
Telecom Egypt has been
given a one-year deadline
to sell its stake in Vodafone
Egypt once the unified licence
is activated. Asked about the
progress of the sale, Essam
said it was a matter for the
board of Vodafone Group and
shareholders.
Essam, recently appointed as
CEO of Vodafone Egypt, said
the company is still studying
the possibility of offering
landline services and has not
reached a decision. n
3
➧
DEALS
DirecTV takeover means Slim will Portugal
buy AT&T stake for $5.6 billion
Telecom
stake in Oi
C
to fall to
25% after
debtor
defaults
arlos Slim Helú will buy out
AT&T’s stake in América
Móvil for $5.57 billion,
propping up his Latin American
operator’s stock price as his
longtime partner from the US
exits the business.
Slim’s holding company,
Inmobiliaria Carso, told
América Móvil’s board it will
acquire AT&T’s 8.3% stake,
which includes 24% of the
company’s voting shares,
according to a filing. AT&T
will receive $4.57 billion at the
close of the sale and another
$1 billion within 60 days of
the closing, AT&T said in a
separate filing.
“Carlos and I have spoken and
he is a very dear friend, but now
he’s going to be a competitor,”
AT&T CEO Randall
Stephenson said in a conference
call before the deal. “And we
recognize that and off we go.”
AT&T is selling its holdings
of Slim’s company after a
24-year relationship to avoid
a conflict of interest because
AT&T is buying DirecTV,
which competes with América
Móvil for pay-TV customers
across Latin America. DirecTV
will cost it $48.5 billion
“América Móvil recognizes
the great value that the AT&T
partnership produced for both
T
➧
Randall Stephenson: Selling América
Móvil for $5.57 bn to help raise
$48.5 bn to pay for DirecTV
parties in these more than 20
years,” Slim’s company said. n
Vodafone
sells stake
in Fiji unit
for $87 m
TeliaSonera to buy Tele2
Norway for $744 m
eliaSonera has agreed to buy
Tele2’s Norwegian business
for 5.1 billion kronor ($744
million) to boost its share of
the country’s mobile market.
The operator needs to grow in
order to compete with market
leader Telenor.
The deal will increase
TeliaSonera’s mobile market
share in Norway to about 40%
from 23% with subscribers
rising to 2.7 million from 1.6
million. Telenor has 3.22 million
wireless customers, according to
data compiled by Bloomberg.
“It produces a lot of
synergies for us given we have
most of their traffic on our
network,” TeliaSonera CEO
Johan Dennelind said. “It’s
smack in the middle of our
core strategy for the Nordics.
We’re keen now to engage with
the competition authorities and
see what’s required to get this
deal through.”
TeliaSonera said the deal
comes with integration costs
of 250 million kronor to 450
million kronor and investments
of 350 million kronor to handle
S
V
Johan Dennelind: We’re keen to
see what’s required to get this deal
through
increased traffic. Cost synergies
are estimated to be at least 800
million kronor annually from
2016, the company said.
“Scale is important in our
industry and I think this will
give us the situation where
we can get to good levels
of profitability in Norway,”
Dennelind added.
Tele2 said the divestment
followed a strategic review
of the Norwegian business
prompted by changes to the
market structure as a result of
a licence auction in December
2013. The company said in
March it was considering a sale
of the Norwegian business. n
odafone has sold its 49% per
cent stake in Vodafone Fiji
to the Fiji National Provident
Fund for $87.6 million.
Vodafone’s exit means
the mobile operator is now
fully locally-owned. The
remaining 51% of Fiji is held
by Amalgamated Telecom
Holdings, which consolidates
and manages the Fiji
government’s investment in the
telecoms sector.
FNPF, which holds a 58%
stake in ATH, now has a
combined direct and indirect
ownership of 79% in the
operator.
Although the mobile operator
is now entirely Fiji-owned,
Vodafone said the group
expects to continue its presence
in Fiji through a partner market
agreement.
FNPF said this would mean
using the Vodafone brand and
some of the group’s proprietary
services. n
contents page
hareholders of Portugal
Telecom, which is merging
with Brazilian operator Oi,
will get a smaller stake in the
combined company after a
debtor defaulted on €847
million ($1.15 billion) of loans.
Portugal Telecom’s stake will
be 25.6% after an agreement to
exchange the debt from Rioforte
Investments, with some Oi ON
shares and Oi Call shares. When
the merger was announced in
October 2013, Portugal Telecom
was set to own 39.6% of the
combined company.
The new agreement
helps Oi chief
executive Zeinal Bava
cement the merger
after the Rioforte
debt had thrown
the transaction into
doubt.
The new agreement helps
Oi chief executive Zeinal Bava
cement the merger after the
Rioforte debt had thrown the
transaction into doubt. Bava,
also CEO of Portugal Telecom’s
PT Portugal unit, is seeking
the merger to improve the
free cash flow profile of the
Rio de Janeiro-based company
and streamline its complex
ownership structure.
Rioforte Investments, a
subsidiary of Espirito Santo
International, failed to make
payments on debt owned by
Portugal Telecom. Rioforte
owes Portugal Telecom an
additional €50 million. The
Espirito Santo group owns 10%
of Portugal Telecom. n
4
➧
DEALS
➧
ACQUIRER
TARGET
PRICE
ANNOUNCED
COMPLETION
MORE
Sprint
T-Mobile US
unknown
September 2014?
not known
Reuters
Bell Canada
Bell Aliant (56%)
$3.7 bn
July 2014
not known
Bell Aliant
TeliaSonera
Tele2 Norway
$744 m
July 2014
not known
GTB
Inmobiliaria Carso
América Móvil (8.3%)
$5.5 bn
July 2014
not known
GTB
Fiji Nat Prov Fund
Vodafone Fiji (49%)
$87 m
July 2014
not known
GTB
Level 3
TW Telecom
$5.7 bn
June 2014
End of 2014?
CNBC
Zayo
Geo
$293 m
May 2014
May 2014
Zayo
Telefónica
Digital Plus
€725 m
May 2014
late 2014?
NY Times
AT&T
DirecTV
$48.5 bn
May 2014
2015?
Bloomberg
Vodacom
Neotel
$460 m
May 2014
end 2014?
Moneyweb
Africell
Orange Uganda
unknown
May 2014
late 2014?
CNBC Africa
Maroc Telecom
Atlantique Telecom
$650 m
May 2014
2014?
Forbes
Xavier Niel
CWC Monaco
€322 m
April 2014
May 2014
CWC
Numericable
SFR
€17 bn
April 2014
Late 2014?
Reuters
Algerian govt
Djezzy (51%)
$2.6 bn
April 2014
July 1905
Reuters
Zayo
Neo Telecoms
$80 m
April 2014
June 2014
Zayo
Vodafone
Ono
€7.2 bn
March 2014
2014?
Bloomberg
Liberty Global
Ziggo
$9.4 bn
January 2014
late 2014?
Washington Post
PPF
Telefónica Czech
€2.4 bn
November 2013
January 2014
Prague Post
Etisalat
Maroc Telecom
$5.7 bn
November 2013
May 2014
Forbes
MegaFon
Yota
$1.18 bn
October 2013
April 2014
MegaFon
Verizon
Verizon Wireless
$130 bn
September 2013
February 2014
Verizon
Telefónica
E-Plus
€8.6 bn
July 2013
June 2014?
Reuters
Three
O2 Ireland
€780 m
June 2013
June 2014?
Three
Comcast
Time Warner Cable
$45 bn
February 2013
2014?
Washington Post
Vodafone
Kabel Deutschland
€7.7 bn
June 2013
December 2013
Bloomberg
contents page
5
➧
ASSET SALES
Telecoms reform ‘can be positive’
says América Móvil CFO
Mexico’s reforms — which have banks and buyers lining up for asset sales from
América Móvil — could have a silver lining for the Slim family’s company, CFO Carlos
García Moreno tells LatinFinance
A
mérica Móvil’s chief financial
officer Carlos García
Moreno has said Mexico’s
sweeping telecoms reform
— which has prompted the
company to divest assets to
lower its domestic market share
— could prove a boon for the
telecoms heavyweight.
“We think the reform can
be very positive,” he told
LatinFinance in an interview.
“I think there are opportunities
in the telecom law,” he said,
adding that the reform brings
a more up-to-date legal
framework to the sector after
more than decade of inertia.
His comments come as
potential buyers line up to pitch
for América Móvil’s assets and
as banks seek advisory roles on
the planned divestments.
“Already we’re beginning
to get signs of interest from
many quarters, including many
unexpected ones,” García
Moreno said, discussing the shape
that the asset sales might take.
Mexican regulators earlier
this year declared América
Móvil, controlled by the
Carlos García Moreno: We’re beginning to get signs of interest from many
quarters, including many unexpected ones
Slim family, a “preponderant
economic agent” in the local
telecoms market. New laws
impose asymmetric regulation,
such as different connection
rates, on dominant players.
América Móvil announced
in July that it would sell
assets to reduce its market
Carlos Slim Helú’s family controls América Móvil, which dominates the Mexican
market
➧
share in landlines and mobile
subscribers to below 50%.
Ending the impasse
Asked whether the firm was
a winner or a loser from the
reform, García Moreno said
asset sales would be “neutral”
because the board of directors
stipulated a divestment must
be at market prices. The
uniqueness of the opportunity
for potential buyers made a
sale at market prices highly
achievable, García Moreno said.
Once the firm is no longer
classed as dominant in the
market, América Móvil should
be able to get a licence for its
long-held ambition to provide
its clients pay television, García
Moreno said. The firm had
been barred from pay TV
under regulation dating back to
an initial telephone concession
granted in 1990.
“There was a bit of an
impasse” under the previous
framework, he said. Technology
contents page
has evolved since the 1990s,
making it possible for telecoms
firms to provide television and
phone lines using the same
infrastructure, said García
Moreno. He noted that pay
TV is an “integral part” of
América Móvil’s business in its
operations outside Mexico.
Under the new framework,
América Móvil is still barred from
pay TV if it remains dominant in
the wider telecoms market.
“To the extent that we cease
to be a preponderant player,
and not subject to asymmetric
regulation, that does away with
regulatory uncertainty and
clears the way for us to move
into pay TV,” he said, discussing
the benefits of the reform.
Meanwhile, a decision to
spin-off the firm’s Mexican
telecoms towers into an
independent entity — which he
said would be listed, and owned
by the same shareholders on
a share-for-share basis — will
also benefit shareholders, as
the towers can be rented out to
new competitors.
“If there are more players
using the same towers, you get
more revenue out of them,” he
said. As such, he said the towers
would have a higher market
value: “They will be assigned a
higher multiple, so our current
shareholders will extract more
value. What we want is to
extract more value from assets
that we have buried in our
balance sheet, at cost.” n
Republished with permission
from LatinFinance, which, like
Global Telecoms Business,
is part of Euromoney
Institutional Investor. To read
the original, go here. A second
article about potential buyers is
available here.
6
➧
RISK
Telcos avoiding EU and US sanctions on
Russian companies, but risks remain
Following the loss of flight MH17, Western governments are imposing sanctions on
many Russian institutions, but so far the telecoms industry has escaped
A
new round of EU and
US sanctions has been
announced in recent days:
the US has announced a new
stage of punitive sanctions
against Russia to include:
Gazprombank (GPB), Rosneft,
Vnesheconombank (VEB)
and a number of military
and defence companies; the
EU has restricted lending
to a number of key Russian
corporates, including VTB,
Bank of Moscow and Russian
Agricultural Bank.
Calls for sanctions began
with Russia’s support for
breakaway movements in
Crimea and eastern Ukraine,
but have amplified following
the shooting down of Malaysia
Airlines flight MH17, with the
loss of 298 people.
But how much will the
telecoms industry be affected?
“The sanctions regime has
largely avoided any of the
domestic sectors,” says Philip
Worman, political risk partner
at consultancy group GPW,
“but the proposed ‘level three’
sanctions — those aimed at
entire sectors — will start to
hurt the Russian economy.”
He adds: “So far there has
been a divergence between
the European Union and the
US. The EU has focused
on separatist politicians,
largely unknown outside the
region. There are very few
business people. The EU — in
particular Germany and France
— doesn’t want to be seen to
hit trading relations.
“The US, on the other hand,
has been far more punitive,”
aiming for friends and colleagues
of Russia’s president Vladimir
Putin, especially those on boards
of oil and gas companies. With
the new EU sanctions affecting
the major banks and possibly
entire sectors of the economy
➧
GPW’s comments for clients on Sistema
and its telecoms subsidiary MTS
Source: GPW briefing for clients
Philip Worman: From earlier weak
and largely symbolic sanctions, the
EU has ramped up measures to bar
capital raising for key Russian banks
and companies
there is now a convergence
between the US and EU, he says.
“So far there has been very
little impact on telecoms.
The US has generally avoided
directly impacting the Russian
population. But the Russian
economy is the thing to watch.
How much damage will this
cause? Russia only just avoided
going into recession in the
second quarter,” he warns.
“There is a danger that if
major sectors are affected,
the Russian economy will
start to tank, with a number
of implications. Just keep on
watching the geopolitics.”
But the US and the EU
are not sanctioning telecoms
operators at the moment, he
adds. “If things got worse there
may be some sanctions applied
to high-tech imports. This has
already happened in the areas
of defence and oilfield services.”
According to extensive
briefing documents that GPW
issues to clients, sanctions
Sistema
MTS
Sistema is exposed to a
broad range of sectors,
including the defence,
energy and finance sectors,
all potential targets
of sanctions; of all its
corporate subsidiaries
perhaps its ownership of RTI
— a defence and technology
company — provides
the biggest exposure
to potential sanctions
targeting. The majority
owner of Sistema, [Vladimir]
Evtushenkov, is not regarded
as a member of Putin’s inner
circle.
MTS is exposed to potential
further sanctions through its
parent company OAO Sistema,
which has holdings in the
energy, finance and defence
sectors (which have been
singled out for sanctions by
the US).
have been calibrated to
avoid outright asset freezes
on key companies, and “the
announcements provide some
‘wriggle room’ for the US”,
says GPW in its briefing.
“The sanctions do not
amount to asset freezes and
prohibit only new projects and
medium-long term financing.
We understand that there has
been considerable negotiation
with US and European
businesses to avoid a freezing
up of short-term financing and
day-to-day operations for these
entities. The sanctions will —
however — delay proposed
larger, strategic projects.”
A memo from the US
Treasury prohibits US persons
within the US “from transacting
in, providing financing for,
or otherwise dealing in new
debt of longer than 90 days
maturity or new equity for
[Gazprombank, VEB, Rosneft
and Novatek], their property, or
their interests in property.”
This step effectively closes
the medium and long-term US
dollar lending window to those
entities, notes GPW.
GPW warns that the US
and EU are “leaning towards
wider and more economically
damaging sanctions”, and notes:
“This view is supported by a
European Council statement calling
for a halt to investment in
Russia by European institutions
— including the European
Bank for Reconstruction and
Development.”
GPW sees these intermediate
sanctions “as a prelude to
more damaging measures
should it be decided that
Russia is continuing to
destabilise Ukraine by either
direct intervention or proxy
influence”. n
contents page
The company is also exposed
to potential further sanctions
through its extensive
operations in Ukraine, where
it has a subsidiary MTS
Ukraina. Prior to the crisis the
company held a 75% market
share in Crimea, where it
continues to operate.
To see Philip Worman’s
presentation on risk from the
GTB CFO summit in March,
go to
http://tinyurl.com/GTB-CFO-Worman
7
➧
FIXED-MOBILE INTEGRATION
Substantial synergies in fixed-mobile M&As
but they are not easy to quantify or realise
Cost synergies are more tangible and measurable than revenue synergies, writes
Emil Arnell, but the quantification of these synergies is not straightforward and
requires detailed analysis
F
ixed-mobile convergence
has been a hot topic for a
long time, but some significant
transactions have taken place in
the past three years, indicating
an increase in momentum.
FMC-driven transactions
are often based on industrial
synergies between the fixed
and mobile operations, which
can be on either the revenue or
the cost side. In this article, we
explore the areas for industrial
synergies, to establish how real
and achievable they may be and
how they can be evaluated as
part of a transaction.
Revenue synergies are difficult
to assess and evaluate, but can
include service convergence and
other economies.
Service convergence between
telecoms, TV and mobile
services typically manifests itself
through cross-selling, either
through integrated bundles —
quadruple-play, for example —
or through less formal bundling.
Having the same provider
for a set of services can, even
without formal bundling,
provide benefits for the end
user — such as receiving a
single bill — and be presumed
to increase customer loyalty.
The distribution networks
of both involved parties can
be used to sell additional
products, which should lead
to more efficient use of the
distribution network.
Revenue synergies can be
substantial but are difficult
to assess because of a need to
compare with a counterfactual
that needs to be defined. Once
the transaction has taken place
the revenue of the separate
parties cannot be compared with
the revenue of the merged entity.
The other problem with this is
that during the transaction phase
the incentive of both parties is to
overstate their revenue forecast
➧
EXAMPLES OF FIXED–MOBILE CONVERGENCE-DRIVEN TRANSACTIONS, WITH ANNOUNCED
TRANSACTION VALUES AND SYNERGY ESTIMATES
Operators
Country
Year Enterprise value Estimated synergies
UK
2012 £1.04 bn
Mobile acquiring fixed
Vodafone acquires Cable & Wireless
Worldwide
Vodafone acquires TelstraClear
Vodafone acquires Kabel Deutschland
Vodafone acquires Ono
Fixed acquiring mobile
Zon merges with Optimus
Numericable acquires SFR
New Zealand 2012 $840 m
Germany
2013 £10.7 bn
Spain
2014 £7.2 bn
£150 m-£200 m by 2016
(run-rate synergies)
No data available
£2.6 bn (NPV)
£2.0 bn (NPV)
Portugal
France
€340 m-€400 m (NPV)
More than €10 bn (NPV)
2013 No data available
2014 €13.5 bn*
* Numericable-SFR transaction value excludes potential additional considerations
Source: Analysys Mason, Altice, Vodafone and Zon, 2014
and understate the one of the
counterparty, which makes
agreement on forecasts for the
separate entities very difficult.
There can also be tradeoffs. The main benefit from
commercial convergence
should, for example, be up-sell
and churn reduction, but in
order to achieve this bundles
typically need to be sold at a
discounts compared to the sum
of their components.
Cost synergies are more
tangible, but can still be
difficult to achieve. The can
come from the following.
Economies of scale, which
can take different forms.
Reduction of future
procurement costs from
increased negotiation power —
similar to revenue synergies,
but this requires a comparison
with a counterfactual.
Elimination of duplication of
assets and functions, and more
efficient use of them. This
can encompass a reduction in
staffing levels but also network
and asset optimisation — there
will typically be overlapping
core networks, billing systems,
interconnect platforms, various
IT systems and distribution
networks. In this case there
would be a trade-off with
economy of scope synergies.
Technological convergence
is becoming an increasingly
interesting driver through the
advent of LTE.
LTE can be used to provide
fixed wireless broadband
services in low-density rural
areas. A merged fixed-mobile
operator can therefore, in
certain geographic areas,
replace wholesale broadband
access-based broadband (a
wholesale product sold by the
regulated incumbent operator)
with LTE at lower variable cost
or extend its coverage — the
case for cable operators, for
example. In cases where the
mobile operator already offers
some fixed services the benefit
can be even greater because the
fixed subscribers of the mobile
operator can be migrated to the
acquired network.
LTE networks require fibre
for backhaul from mobile sites
— integration with operators
with significant fixed networks
can provide faster and lesscostly access to fibre backhaul.
Cost synergies are typically
more tangible, quantifiable
and realisable than revenue
synergies.
However, they may require
integration investments and
effort to achieve. Furthermore,
a proper evaluation would
contents page
require a detailed data-based
analysis, which can be difficult
to fit into a due diligence
because of timing constraints
and access to granular data.
There is a real potential
for achieving revenue and
cost synergies in fixedmobile convergence-driven
transactions. Cost synergies are
more tangible and measurable
than revenue synergies, but the
quantification of these synergies
is not straightforward and
requires detailed analysis.
Cost synergies can therefore
be incorporated in the
transaction value, whereas
revenue synergies are better
treated as a future upside.
However, there have also
been some recent examples
of moves in the opposite
direction. Tele2 has spun off
its fibre and cable-TV arm in
Sweden to Telenor; Rostelecom
has spun off its mobile
operations into a joint venture
with Tele2 Russia; and there
are rumours that Wind will sell
its fixed Infostrada unit in Italy
to Vodafone. n
Emil Arnell is a principal at
Analysys Mason. Follow this
link for the original version
of this paper on Analysys
Mason’s website
8
➧
Global Telecoms Business
for the industry’s CFOs
Who will be the CFOs in
the hot financial seats in
our industry next year?
We on Global Telecoms Business
have been publishing an
annual guide to the 50 CFOs to
watch for the past few years.
We’re now looking for the
50 CFOs of telecoms service
providers to watch for 2015. We
want your help in identifying
them.
GTB CFO Summit
Publication
Online in February 2015 and in
the printed January-February
2015 issue
Deadline for nominations
Monday 1 December 2014
How to nominate
Send an email to the
editor, Alan Burkitt-Gray, at
[email protected].
To help us track and follow up
nominations please start the
email subject line with ‘CFO to
watch’ and the person’s name
CFOs are telling us that they, and the
telecoms industry, are facing a new
set of challenges
■■What sustainable revenue streams
can operators continue to rely on
and what new revenues can they
develop?
■■What costs can operators continue
to take out from their networks to
become still more competitive?
■■What are the sources of finance for
building the fast fixed and mobile
broadband networks that we need?
■■How can operators continue to
be an attractive proposition for
shareholders, banks, private equity
and other investors?
The next GTB CFO Summit will bring
together carrier CFOs to explore the
issues they have raised and look for
➧
contents page
answers. Delegates attending the
Summit will be able to gain a great
deal of important market intelligence
from the speakers and the panels.
The GTB CFO Summit offers excellent
networking opportunities because
there will be a major concentration of
CFOs in one place.
This will be the third annual GTB CFO
summit and we’re already booking
speakers — industry leaders such as
Joe Euteneuer, the CFO of Sprint,
is one of the first to agree to take
part.
The event will be in London on
Tuesday 24-Wednesday 25 March
2015 (Please note change of date).
We’ll be announcing the full exciting
agenda and details of the venue later
this year — but put the dates in your
diary now!
9
➧
INVESTMENT
Attractive opportunities for
the experienced emerging
markets investor
Emerging market operators may well be better placed for growth than their developed
market peers, especially as telecoms becomes a discretionary spend of the
expanding middle classes, writes Dominic Halfpenny
A
new game with new rules
is emerging in the industry.
Subscriber growth is slowing
as penetration reaches maturity
levels. Regulators have opened
up markets aggressively: the
largest markets in Africa now
have seven mobile network
operators on average, versus four
operators in the largest markets
in Europe. An industry that
was used to reporting doubledigit revenue growth every year
is now reporting single-digit
top-line growth, with margins
remaining constant at best.
But the lack of fixed
infrastructure and the
relatively high price of
consuming imported digital
content — due to expensive
international bandwidth — has
constrained broadband usage
in emerging markets, leading
to a tremendous latent demand
for broadband data and related
services. According to the
TeleGeography data, the average
cost for international bandwidth
in the largest three African and
south-east Asian markets was
about $2,500 per megabit per
second a year, equivalent to
over half of average GDP per
person. In Europe by contrast,
the equivalent three largest
markets were paying about $50
per megabit per second a year
or 0.1% of average GDP per
person.
Comparing a sample of
operators from across Africa,
the Indian subcontinent and
south-east Asia with a sample
of European operators reveals
emerging markets operators
generate less than a tenth of
their revenues from the business
➧
segment versus over a quarter in
Europe, showing the magnitude
of the opportunity that exists.
Telecoms players are using
their infrastructure and data
assets to become enablers for
a broad range of products and
services that traditionally belong
to other industries. We are
seeing telecoms players directly
launching products such as
mobile money that disrupt
traditional industries and offer
new services to previously
unserved populations.
Additionally, telecoms players
are using their access to valuable
subscriber data to provide
a so-called mediation layer,
serving as enablers for digital
players to offer enhanced and
innovative services to customers
through the operators.
Global economic growth
over the medium term will
increasingly be driven by
emerging markets. The IMF
projects that emerging markets
will account for 74% of global
GDP growth through 2017,
growing on average twice as
fast as developed markets,
which should continue to
benefit the telecom sector.
Mobile and particularly data
usage are driven by youth.
According to Nielsen, 84%
of Chinese youth use their
phone beyond text and voice
compared to 47% of adults, and
83% of American youth use
advance data features compared
to 32% of the adult population.
Meanwhile, the UN
predicts that emerging market
populations are expected
to add close to 400 million
people between 2012 and
Dominic Halfpenny: Global economic growth will increasingly be driven by
emerging markets
2017. These populations will
remain relatively young, with
an average age of 27 in regions
such as the Middle East and the
Indian subcontinent.
Mobile and data consumption
is becoming one of the first
discretionary consumables —
beyond basic food and shelter —
of the expanding middle classes.
According to Angus Maddison at
the University of Groningen and
Homi Kharas at the Brookings
Institution, the continued
expansion of the middle class in
emerging markets will result in
sustained consumption growth as
an increasing proportion of the
population rises above subsistence
levels and begins to enjoy
discretionary disposable income.
This income will increasingly
be spent on products and
services offered by telecoms
operators and other players in
the ecosystem.
contents page
These strong fundamentals,
combined with attractive
valuations for assets in
emerging markets, should
allow experienced investors
with longer-term horizons to
generate attractive returns by
investing in the sector. Despite
overall optimism, investors
should remain cautious and
remember there is no such
thing as a single emerging
market today, and opportunities
as well as risks must be assessed
on a country-by-country and
deal-by-deal basis. n
Dominic Halfpenny is
director at the private equity
division of Delta Partners,
an advisory and investments
firm specialising in the
telecommunications, media
and digital sector with a
specific focus on emerging
markets
10
➧
WHOLESALE
Industry challenges present
significant long term
opportunities for leaders
Sanjay Baweja, CFO of Tata Communications, writes about the company’s role in the
wholesale telecoms market. It is a scale business and that augurs well for a broad
based player
T
here are significant price
pressures that service
providers are facing in the
consumer side of their
businesses and there is also a
fair bit of industry consolidation
taking place in some markets —
the US as an example.
Against this backdrop,
carriers are likely to be careful
and selective with their network
spends, taking a measured
approach towards network
investments and will be looking
to optimise wherever possible.
This can result in some demand
sluggishness or pricing pressure
in the near term.
However, this environment
and near term challenges also
present significant long term
opportunities for leaders like
us. The overall traffic demand
is something that is explosive
because of the growth of the
applications the consumer is
accessing, the growth of video
and of machine-to-machine
communication, and the
internet of things is a traffic
stream which will begin to grow.
All of this will require the
carriers to come back after they
optimise their networks to again
invest in capacity creation and,
given the reach and breadth of
our network, we believe that we
are very well positioned.
We believe we have the scale
and leadership. We have the
Sanjay Baweja: Wholesale is an
important part of the business that
gives us significant scale and global
reach
ability to cross sell multiple
services and also enable carriers
to make transformations into
new business models.
Wholesale is a very competitive
market where prices have always
been declining. However, pace
of price declines have moderated
somewhat over the years and
price declines are related to
reduction in per-unit cost of
delivery — such as upgrades
from 10G to 40G to 100G.
It is a scale business and that
augurs well for a broad based
leading player like us. As traffic
volumes continue to grow, we
continue to witness revenue
growth despite price declines.
This incremental revenue growth
generates significant operating
leverage giving us stable and
improving margin profile.
We also continue to drive
significant focus on streamlining
business processes and optimizing
our cost structure across the
As traffic volumes continue to grow, we
continue to witness revenue growth despite
price declines. This incremental revenue
growth generates significant operating
leverage giving us stable and improving
margin profile.
➧
board. These efforts not just
allow us an opportunity to lower
our cost structure but also double
up as revenue growth initiatives
aimed at improving efficiency and
putting us in a better position to
win in the market.
Lastly, our diverse business
mix across lines of business
— voice and data — as well
as geographies, covering
developed and emerging
markets and customer segments
— carrier and enterprise —
positions us well to absorb and
mitigate any individual sector
specific margin pressures.
Both wholesale and enterprise
telecoms are equally important
segments for us and co-exist,
building on strengths of each
other. Our strategy requires
us to be — and is built around
our being — both in the
carrier space as well as in the
enterprise space, because we
believe that there is a symbiotic
relationship between the two.
The carrier segment is an
important part of the business
that gives us significant scale
and global reach which in
turn is used by our enterprise
business to serve the large
enterprise customers.
We do not even look at our
carrier business as wholesale
business: we look at it as
solution business and we are
increasingly white-labelling
things that we build in the
enterprise space to noncompetitive carriers so that
they can undergo the similar
transformation that Tata
Communications has.
Some of the key building
blocks of what we do today
contents page
and what will stand us in good
stead as we go forward is a very
powerful set of cable assets.
We have a massive undersea
network that enables us to
connect different corners of
the world and also in a very
reliable manner.
Global ethernet is really using
that sub-sea network. So it’s
really not just a raw capacity,
but with that network, we’ve
been able to develop specific
services and products targeted
for specific segments.
A recent example is launch
of our low latency network
specifically targeted for
financial services sector. We’re
also building other products
and services which are quite
revolutionary in that sense.
These are possible because we
have the undersea cable assets.
Wholesale services for both
fixed and mobile operators are
an important focus area for
Tata Communications. While
the fixed operator ecosystem
has been around for a while,
mobile operators are now
emerging as an important
segment and we are focused
on helping mobile operators
with cutting edge solutions and
services. We are developing and
launching several new services
focused on mobile operators.
We cover the breadth and
depth of wholesale telecoms
market, being a truly global
player with our unparalleled
infrastructure reach — the
only player with a network ring
around the world —
and relationships with over
1,600 global carriers and 700
mobile operators. n
11
➧
MERGERS
Numericable deal ‘will create
powerful rival to Orange’,
says SFR’s Jean-Yves Charlier
The merger of French operators SFR with Numericable will bring a powerful
combination of fixed and mobile broadband services, SFR’s CEO Jean-Yves Charlier
tells Alan Burkitt-Gray
B
y the end of 2014, says JeanYves Charlier, he will be in
charge of the company with
the biggest fixed broadband
infrastructure in France.
He is CEO of SFR, best
known as a mobile operator.
But “we have 5.3 million ADSL
customers and 220,000-300,000
fibre customers”, he says. And
the media company Vivendi
is selling SFR to Altice, the
owner of French cable operator
Numericable, “and they have
today 1.7 million customers”,
says Charlier.
“Put them together, of which
about two million are highspeed — it will make SFR the
leader in the deployment of
high-speed services in France.”
The new merged company
will use the SFR brand, says
Charlier, who joined Vivendi
in 2012 to sort out its telecoms
strategy. Altice’s founder
Patrick Drahi has offered him
the position of CEO of the
combined entity.
Under the terms of the
takeover Vivendi will receive
€13.5 billion and will keep
a 20% stake in the new
combination, though it will
be able to sell that after a
year. Vivendi will also receive
an earn-out of €750 million
depending on the future
financial performance of the
new group.
“It’s the first time that we
will have a more extensive
infrastructure than the
incumbent with this broad,
high-speed cable network that
Numericable has built over the
last 10 years. The combined
company will be able to offer
➧
Jean-Yves Charlier: We have reduced
our cost base by close to 15% to
be able to sustain our investment
models in the market place
services to 10 million homes.
“We have an ambition to
increase that to 12 million by
2015 and to 15 million in 2020.”
When Charlier joined
Vivendi there was a priority
to reposition SFR because all
French mobile operators had
been hit hard by the arrival
of Iliad’s low-price operator
Free into the market. “We
started seeing the results in
2013. In volume terms we’re
back into growth mode in both
the broadband and mobile
businesses and we’re regained
innovation momentum.”
More was needed: “We
implemented very significant
transformation plans to change
the business models and the
cost structure of the business
and to refocus again on
customers.”
As a result, “we have reduced
our cost base by close to
15% to be able to sustain
our investment models in the
market place”, he says.
But that “was not going to
be enough”, adds Charlier.
“We really needed to address
the structure of the French
telecoms market place and we
made not just one move but
quite a series of moves over the
last 18 months.”
There was a mobile network
sharing agreement with
Bouygues Telecom, owned
by the Bouygues construction
group, which made an
unsuccessful bid for SFR.
The network sharing deal was
independent of any M&A talks.
In February 2014 the
company bought the French
division of Belgacom’s
services company Telindus “to
reinforce our position in the
enterprise space”. According to
SFR’s announcement Telindus
France had revenue of €241
million in 2013.
In May, with the SFR
takeover already planned,
Numericable announced plans
to buy Virgin Mobile’s business
in France for €325 million.
What Charlier calls “the
leading MVNO in France” has
1.7 million customers.
“We took a perspective
that the French market was
unsustainable in terms of the
number of players. We wanted
to have first-mover advantage
contents page
and we studied all options —
and we are very pleased with
this transaction and the other
acquisitions we have done for
fundamentally strategically
repositioning SFR.”
He believes “fundamentally”,
he says, “that the market needs
to converge to a three-player
market in France.” It may take
some time to find two from
Orange, Bouygues and Free
that are willing to merge.
In addition, says Charlier,
“we’ve broadened our
partnership with Vodafone. We
felt it was important to be part
of the largest club in Europe.”
Vodafone has long been a
partner of SFR: indeed, the
UK company owned 44% of
SFR until 2011, when Vivendi
took over Vodafone’s share for
almost €8 billion.
The aim, says Charlier, is “to
reduce structurally the number
of players in the French
market”. Not only that: “Cable
assets in many countries —
including France — represent
the best high-speed network
infrastructures that are built
today. France has embarked
on an FTTH strategy which
is very costly to deploy and
slow to deploy and we think
that, with the substantial
leadership position that SFR
has already in the marketplace
in a number of segments, the
addition of this cable network
provides real strengths for our
convergence play.” n
A longer version of this
interview appears on the
Global Telecoms Business website
here
12
➧
PROCUREMENT
Telekom Austria group saves €90m
with better procurement initiative
Telekom Austria’s group CFO Siegfried Mayrhofer told this year’s GTB CFO summit
how the company had saved €90m through a procurement initiative, Sourcing 4
Success. Now his colleague Alexander Kuchar, head of group purchasing, explains
how the successful programme was implemented
Deep understanding
of the business unit
processes is needed
to unlock new
levers.
W
hen we started Sourcing
4 Success, we had high
hopes to bring a significant
contribution to the profit and
loss with the purchasing team.
After one year of hard work,
and two previous years of
preparation, we are delighted
about the impact this crossfunctional programme has
brought to our company: a €90
million saving.
We started to shake up the
procurement team considerably.
■■We introduced a state-of-theart organisational structure
with operative and strategic
purchasing separated, the
latter unit arranged in four
categories tightly aligned
with our business units: IT;
network; marketing and
services; and construction
and facility.
■■We beefed up the skills of
strategic purchasing team,
mainly by hiring in-house
Alexander Kuchar: Companywide
attention meant that barriers
vanished to allow us to touch what
were regarded as sacred cows
➧
Telekom Austria CFO Siegfried Mayrhofer: Positive positioning helped us
overcome the well known barriers to push the organisation to always save more
grown experts from the
business units — as today,
deep understanding of the
business unit processes
is needed to unlock new
levers — but also by a
training programme for all
purchasers.
■■We changed the language
of procurement: S4S savings
are measured in budget
terms over 12 months,
and of course approved
by controlling, reported
transparently in five maturity
levels, and are put upfront
into the budget. The last
step considerably tightened
the cooperation between
purchasing and controlling,
bringing lots of new insights
to the controllers and
purchasers likewise.
Based on these ingredients,
supported by McKinsey, we set
up a programme 12 months
ago that systematically went
through all categories — that
is, all central procured spend
— identified around 250
initiatives, run in 10 crossfunctional teams covering
experts from all major
business units, controlling and
procurement, resulting in a €90
million saving programme.
Regular CxO attention in
monthly category steering
meetings led not only to high
motivation of the teams to
go the extra mile, but even
allowed them to unlock so far
unseen levers.
Many of these required
changes in the way we —
especially the business unit
— work, adapting processes
and reducing specifications and
scope.
Eventually, driven by company
wide attention and excitement
about the success of the
contents page
program, barriers also vanished
to allow us to touch what were
regarded as sacred cows.
Finally, we now see improved
mindset on cost awareness and
the power of the procurement
process on a broad scale.
Today, Sourcing 4 Success has
been transferred into regular line
activities, tightly integrated into
the company planning process,
and exported to all operations of
the group in a next step.
Which of the changes
Telekom Austria put into the
organisation were key? It is
the orchestration of the many
steps that finally resulted in a
significantly tighter cooperation
between all parties involved,
the business unit, controlling
and the procurement team
eventually leading to these
fabulous results.
Siegfried Mayrhofer, the
group CFO, adds: “It was
wise to set stretched/tough
budget goals to the business
units upfront — by the CFO,
controlling — and position the
procurement team and S4S
as a tool the CFO provides to
reach this goal. This positive
positioning helped us overcome
the well known barriers to
push the organisation to always
save more.” n
To see Siegfried Mayrhofer’s
PowerPoint presentation from
the 2014 GTB CFO summit,
go to
http://tinyurl.com/GTB-CFOMayrofer
13
➧
PEOPLE
Dutch politician to become
CFO of KPN
K
PN has named Jan Kees
de Jager, the former Dutch
finance minister, as its chief
financial officer. De Jager
will start on 1 November.
De Jager was a member of
the Dutch cabinet from 2007
until 2012, first serving as
deputy finance minister and
from 2010 to 2012 as finance
minister. He also held positions
at ISM eCompany, which he
co-founded.
“Jan Kees combines extensive
financial experience with
operational leadership in the
technology sector,” said Jos
Streppel, chairman of KPN’s
supervisory board. De Jager’s
contract will start in August and
he will assume responsibilities
for the CFO role in November
after a transition period.
He will earn a base salary of
€625,000, and is also eligible
for a short-term variable cash
incentive and a long-term
variable incentive based on
conditional shares, said KPN.
De Jager succeeds Steven
van Schilfgaarde, who has been
acting CFO since September
2013 and will continue until de
Jager takes over.
Citi appoints telecoms
and media bankers
C
iti has appointed Emmanuel
Gionakis as its head of
telecoms in Europe, the Middle
East and Africa, effective
immediately. He will also take
the role of COO for telecoms,
media and technology in
EMEA, responsible for the
day-to-day management of the
group. Gionakis has been with
Citi since 1999.
Michael Longoni will re-join
Citi as managing director
and head of EMEA media in
September from Barclays Capital.
Fahd Beg will become head
of EMEA internet and digital
media at the bank, working
closely with both the global
technology and media franchises.
Erik Arveschoug was
recently appointed as Citi’s
corporate banking head of
EMEA TMT. n
Oracle’s CFO is highest
paid woman in US
S
afra Catz, CFO of Oracle,
is the highest paid woman
in the US, outstripping CEOs
Marissa Mayer of Yahoo!
or Indra Nooyi of PepsiCo,
reports Forbes, quoting
research firm FindTheBest.
Catz’s total pay in 2013 was
$44.3 million, says the report.
Her salary was $950,000 but
she was also awarded options
worth $42 million and other
incentives worth $737,000. n
➧
Safra Catz: $44.3 m to take home
in 2013
Jan Kees de Jager: ex finance minister becomes CFO of KPN
De Jager said: “I am very
pleased to become KPN’s
new CFO. KPN is one of the
leading Dutch companies with
a rich history and operates in
a dynamic telecom landscape.
I look forward to work closely
with Eelco [Blok, CEO of KPN]
and the board of management,
the supervisory board, KPN
employees, shareholders and all
other stakeholders.” n
Financier joins
business telecoms
operator
M
aintel, a UK businessto-business telecoms and
data services company, has
appointed Annette Nabavi the
board as non-executive director
with immediate effect.
She previously held the
position of head of telecoms
global business development
for corporate finance at
ING Barings, where she
gained significant experience
in M&A, private equity,
structured debt and public
equity transactions.
Nabavi is a partner at
AHV Associates, a corporate
finance advisory firm, and
also undertakes consultancy
projects through her own
consulting firm, Anchusa
Consulting.
She was founding director
and CEO of XchangePoint
Holdings, a venture capital
backed internet interconnect
company providing broadband
metro ethernet based services
to ISPs and carriers, and is
finance director of Women
contents page
Annette Nabavi: Former ING Barings
banker becomes non-exec director
at Maintel
in Telecoms & Technology,
a mentoring and networking
group with over 500
members, and a member
of the advisory board of
the UK’s National Media
Museum. n
14
➧
PROFILE
New challenges ahead for CFO as Interoute
board lines up €200m fund for acquisitions
Catherine Birkett joined Interoute in 2000 just before the dotcom crash, and after a
decade as CFO is looking forward to the challenges as the company allocates money
for expansion
I
nteroute has an expansion
programme and the board has
allocated a budget of up to €200
million to acquire businesses.
That’s a complete contrast
from the position Interoute
was in back in May 2000 when
Catherine Birkett first joined
the company, of which she’s
been CFO for nearly a decade.
“The place was chaos. There
were no sales,” she recalls.
The company had debt
finance from equipment vendor
Alcatel, “but the original deal
had running costs that wouldn’t
work, weren’t feasible”. Jim
Kinsella was hired as CEO
of Interoute and “he brought
sense to the place”.
Interoute went into
receivership in 2003. “That’s
when we started to relaunch. We
had running costs of €1 million
a year and no revenue.” Birkett
was part of the restructuring
team with the existing CFO,
Steve Clutton, but he left at the
end of 2004 “and Jim gave me
the chance to step in. I was 31.”
Birkett comes from
Normanton, a former coalmining town in West Yorkshire
in the north of England. No
one in her family had ever been
to university “but when I was
seven or eight I said I wanted
to go to Cambridge”.
She maintained her drive and
ambition, even though she went
to a school that typically sent
only five students to university
in each school year of 200.
She was offered a place at
Cambridge to study maths —
and turned it down.
“I took up an offer from
Durham University to study
maths and economics.” That
suited her better — and she
admits today that she probably
wouldn’t have been suited to a
straight maths course. “Numbers
come very naturally to me, but I
➧
Catherine Birkett: Restructuring Interoute was a big learning experience and I wouldn’t be the person I am today without it
wasn’t good at studying. But I had
a good time at university. It gave
me a lot of social confidence. I
was on the bar committee.”
After university she accepted
an offer from KPMG in Leeds
and began her accountancy
training.
Birkett got early experience
in restructuring, when one of
KPMG’s audit clients ran into
difficulties. “There were so
many problems it got delisted.
We spent six months sorting
out the books and records.”
And the client worked across
many jurisdictions — great
experience for later years.
Birkett and her husband
decided to move to London
for a couple of years, so started
looking for jobs there. “He got
the job spec for the Interoute
job but thought it was much
more me. One of my strong
skillsets is financial modelling.”
After the restructuring “in the
first proper year end, in 2005,
it took PwC nine months to
complete the audit — there was
nothing wrong, and we ended
up with an unqualified audit
report”, but the company had a
very negative earnings.
“We had a lot of changes
to make and a lot of things to
put in place. It was definitely
a big learning experience and
I wouldn’t be the person I am
today without it. Today the
audit just happens.”
Birkett had a couple of years
proving that the company was
on track “and then I had I my
two girls”, now six and four.
“It was the right time. And
it gave me drive, knowing I
wanted to be here.”
Now Interoute is in “a
much more stable and steady”
condition. The company has two
shareholders, the Sandoz Family
Foundation with 70% and Dubai
Holding, with the rest. Some
might consider that it’s time for
them to sell it off to another
contents page
operator — but the board, now
chaired by Gabriel Prêtre of
Sandoz, has decided to expand.
“All the banks were keen to
lend us money, which says a
lot about our position.” What
sort of acquisitions are she
and the rest of the leadership
team looking for? Most likely
“IT services around enterprise,
perhaps cloud”, with the UK
and Germany high on the
list, “but we would consider
a network play if there were
synergies”, says Birkett.
“We’ve got the money and
we’ve started to look.” There
are private equity-owned
businesses around “and we
hope to try to complete by the
end of the year”.
For Birkett, this is the
beginning of a new phase at
Interoute. “We haven’t yet got
Interoute to where it has to
be. I don’t think the story is
finished.” She’s looking forward
to plenty more challenges. n
15
➧
ANALYSTS
Turkish bank wins top score in
rating of mobile banking apps
G
aranti Bank of Turkey
has come in first place in
Forrester Research’s survey of
mobile banking apps.
Spain’s la Caixa and Poland’s
mBank earned the second and
third highest overall scores
in the survey, says Forrester,
which looked at the retail
mobile banking offerings of
32 large retail banks in 11
countries: Australia, Canada,
France, Germany, Italy, the
Netherlands, Poland, Spain,
Turkey, the UK, and the US.
“The firms we reviewed
have laid strong foundations
with a variety of account
information and transactional
features,” says senior analyst
Peter Wannemacher in the
new research.
“To build on these strong
foundations, digital banking
teams should help customers
with money management,
engage them with contextually
relevant information, and start
Garanti Bank: new mobile banking
app iGaranti performed exceptionally
well
generating sales leads with
product offers and information.”
The banks achieved an
average overall score of 61 out
of 100 across seven categories:
range of touchpoints,
enrolment and login, account
information, transactional
functionality, service features,
cross-channel guidance, and
marketing and sales.
Garanti Bank of Turkey
received the highest overall
score among the banks rated
by Forrester, performing
exceptionally well with its new
mobile banking app iGaranti.
In addition, Garanti scored 99
out of 100 in the transactional
features category.
La Caixa achieved the
second highest overall score,
performing well in the rangeof-touchpoints category.
Poland’s mBank achieved the
third highest score due to
the launch of its new online
banking platform and strong
mobile initiatives.
US banks averaged the
highest overall score in the
review, “largely because they
do the basics so well”, said
Forrester, and averaged the
highest scores in three key
categories: account information,
transactional functionality, and
service features.
Mobile coupon users to reach
1 bn in 5 years
A
new report from Juniper
Research has found that
there will be 1.05 billion mobile
coupon users by 2019, up from
just under 560 million this year.
Disruptive technologies such
as near field communications
and Beacon have the potential
to boost in-store engagement in
the medium term.
The report author Windsor
Holden said: “While NFC has
failed to achieve traction thus
far, the emergence of a cloudbased secure element through
HCE — host card emulation
— is likely to stimulate greater
integration into wallets. We
believe that this in turn will
provide the visibility that
should encourage brands
to run campaigns using the
technology.”
➧
The report claims that the
surge in mobile coupon user
numbers is driven by increased
retailer engagement with mobile
channels. Retailers are now
integrating coupons into loyalty
programmes to a far greater
extent, says Juniper, while
focusing on delivering coupons
direct to consumers rather than
relying on aggregator sites.
At the same time, the
report observes that mobile
coupon deployments are
benefitting from retailers
restructuring their businesses
to reflect the wider transition
to the utilisation of online
engagement channels.
Those businesses are
becoming more agile, more
efficient and able to implement
change more rapidly than
would have previously been the
case, Juniper adds.
Other findings from the
report include:
Geotargeting has provided
SMS-delivered coupons with a
new lease of life, with retailers
seeing high redemption rates
from coupons pushed to
consumers near their stores;
Brands are increasingly
leveraging the retail database to
deliver targeted coupons;
Lack of adequate POS
redemption technology remains
the key hurdle to greater
deployment and adoption. n
Mobile Coupons — Consumer
Engagement, Loyalty &
Redemption Strategies 20142019 is available from Juniper
Research for £1,750
contents page
La Caixa performed well in
touchpoints category and was
second overall
Marketing and service
features are common
deficiencies. For example, few
banks include marketing calls to
action or guidance to additional
product information within
their mobile apps and mobile
websites. While Forrester’s
evaluation showed that most
banks are meeting almost all
of mobile banking users’ basic
needs, there are opportunities
to improve. n
The 2014 Global Mobile
Banking Functionality
Benchmark is available from
Forrester Research for $499
India’s mobile
connections ‘to
reach 815 m
this year’
M
obile connections in India
will grow to 815 million in
2014, an 8% increase from 755
million connections in 2013,
according to a survey from
Gartner. The mobile services
market in India will remain
almost at the same level as 2013
at $19.2 billion in 2014.
“The mobile market in India
is going through a rough patch,
where voice average revenue
per user is falling very fast, and
the increase in data ARPU is
not able to fully compensate
for the decline,” said Neha
Gupta, senior research analyst
at Gartner. n
Forecast: Mobile Services,
Worldwide, 2012-2018, 2Q14
Update, is available from Gartner
16

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