Wednesday, July 25, 2007

TomTom snaps up Tele Atlas

Europe's leading in-car navigation systems provider TomTom NVhas agreed to acquire digital map producer Tele Atlas NV for an enterprise value of EUR1.8 billion ($2.5 billion), the companies said Monday, July 23.

The Amsterdam-based buyer plans to offer Tele Atlas investors EUR21.25 per share, valuing the target's share capital at about EUR2 billion. Tele Atlas has about EUR200 million cash on its balance sheet.

The offer represents a 28% premium to Tele Atlas' closing price on Friday and has the backing of both boards.

The Dutch target supplies TomTom, also of the Netherlands, with digital road maps of U.S. and European countries to be used in tandem with in-car navigation systems it produces.

The companies said the merger will allow them to offer more accurate navigation information, improved coverage and new features, including daily map updates and intelligent routing to TomTom's 10 million navigation devices. Following the merger, Tele Atlas will continue to operate as a separate unit, developing and licensing digital map products for TomTom and other customers.

Tele Atlas shares were up EUR5.72, or over 35%, at EUR22.27 per share by late afternoon in Amsterdam, suggesting that investors are expecting a competing bid. The company is also listed in Frankfurt.

Shares in TomTom were up EUR4.08, or almost 10%, at EUR45.06.

Marcel Achterberg a Netherlands-based analyst at ING Group NV, thought TomTom was Tele Atlas' most suitable partner, though he didn't discount the possibility that a rival bidder would emerge.

"The deal makes sense for TomTom; it could [extract more] synergies than anyone else, and the deal would give it vertical integration and re-engergize growth as TomTom's [growth] is slowing," Achterberg said.

"There could still be competing bids for the company, ones from the software or teleco space or a company like Google[Inc.] or Yahoo! [Inc.]," Achterberg added. "But if Google had wanted to buy it, it probably already would have."

Amsterdam-based TomTom said it has already received irrevocable undertakings from International Asset Management BV and from Tele Atlas' board to tender shares representing about 17.4% of the target's share capital.

TomTom expects to publish an offer memorandum in October, and to complete the transaction by the end of 2007. The company is entitled to a EUR20 million breakup fee should the Tele Atlas board recommend a competing offer.

TomTom also released better-than-anticipated second-quarter earnings Monday. The company reported net profit of EUR68 million, up 81% from the same period a year ago, on revenue of EUR380 million, up 37% from last year.

Tele Atlas, which is based in the Dutch town of Den Bosch, had a net loss of EUR19 million in 2006, Ebitda of EUR42.8 million and revenue of EUR264.3 million.

The TomTom offer is 28 times Tele Atlas' projected 2007 Ebitda, the companies said.

Lehman Brothers Inc.is serving as financial adviser to Tele Atlas along with Atlas Advisors. Scott Simpson of Skadden, Arps, Slate, Meagher & Flom LLPand Houthoff Buruma NV are acting as legal counsel.

Goldman Sachs International, which is providing debt financing for the deal, is TomTom's financial adviser. Stibbe NV, Herbert Smith LLPand Willkie Farr & Gallagher LLP are providing legal counsel.

URL: http://www.TheDeal.com

Tuesday, July 17, 2007

Telco Daily 17-July-2007

TELEFÓNICA INSISTS MAJOR DEALS ARE OUT
Telefónica spent more tan EUR 100 billion during the past decade to build up operations in 22 countries. Now, Telefónica's Chief Financial Officer, Santiago Fernández, said the company has sworn off big deals and will push for internal growth. WSJ added that this is an important turn for investors that are still skittish about Telefónica's EUR 55.1 billion debt pile. (The Wall Street Journal)

TISCALI EXPANDS PRECENCE IN THE U.K
Tiscali agreed to buy Pipex Communications PLC's broadband and voice businesses for EUR 310.43 million in a deal that expands Tiscali's presence in the United Kingdom. Tiscali already makes most of its revenue in the United Kingdom and has reshaped itself in the past 18 months with asset sales and a renewed focus on its Italian and U.K. operations. (Financial Times)

PROVIDENCE REVIVES ITS VIRGIN MEDIA INTEREST
FT wrote that Virgin Media is understood to have been approached by Providence, the private equity group, about reviving its interest in taking over the cable group. First-round offers are expected next month, with the second round in August. (Financial Times)

Monday, July 16, 2007

Orange dips its toe into the UK MVNO

Hot on the heels of the Vodafone/Asda announcement last week, advertising-funded MVNO Blyk has announced that Orange will be its host network provider. Blyk, which describes itself as a ‘pan-European free mobile operator for young people, funded by advertising’, aims to launch in the UK in end-2007.

This is the first MVNO deal for Orange in the UK, and it seems that other UK operators are now intent on giving T-Mobile a run for its money on wholesale MVNO deals. Vodafone already has an MVNO partner, Dot Mobile, which focuses on a similar target market, while T-Mobile has Virgin Mobile. However, Blyk’s unique business model is a major differentiator.

I think that advertising-funded mobile services is an interesting concept, and potentially very attractive to consumers and advertisers alike. However, i do see a few potential issues that may have an impact on Blyk’s success. I have to question how much it can really afford to give away for free. I do not yet know the precise details of its business model or its proposition to consumers, except that it relies on push SMS and MMS advertising, but we would be surprised if advertising revenues alone are enough to cover its network bill from Orange. In addition, it will need to offer excellent customer services and support, which will involve significant capex in the first year of operation. The fact that its business model is so unique means that it will need a strong team in place to deal with inevitable customer queries.

In order to succeed, Blyk will need to attract a fairly large number of consumers within its initial months of operation. The fact that it is offering something for(nearly) nothing means that it may well do so. However, it will also need to work hard at retaining these users past the first couple of months, once the initial novelty factor wears off.

The fact that it will be a SIM-only proposition means that there is also the possibility that consumers could try and exploit the service. They may simply swap in their Blyk SIM card to use their free minutes and texts and view advertisements when they feel like it, and then swap in another low-cost provider’s SIM for regular use.

The Blyk business model relies on advertisers signing up to target 16–24 year olds with advertisements. The initial announcement of six companies including Buena Vista, Coca-Cola and mobile gaming company I-Play is an encouraging start. However, in order for it to be a success we would expect to see more big-name advertisers signed up prior to its planned launch in end-2007.