NEW YORK – The quest for spectrum and subscriber growth made 2013 an unusually busy M&A year for wireless telecom in the U.S., while cable also had a banner year. According to American research firm SNL Kagan, those trends show no signs of slowing this year.
Wireless
Sprint Corp. is reportedly looking to buy rival T-Mobile US Inc., with SoftBank Corp. and DISH Network Corp. rumored to be interested in acquiring the nation's fourth-largest wireless carrier for more than $20 billion.
SoftBank is said to be talking to at least six banks about putting together a financial deal to go after T-Mobile in 2014. The subscriber total for a combined Sprint Corp./T-Mobile entity would be neck-and-neck with AT&T Inc. and come closer to industry leader Verizon Wireless.
But analysts believe the deal would face regulatory challenges given the government's preference for having four major national carriers. Regulators cited this as one reason for blocking AT&T's $39 billion pursuit of T-Mobile in 2011.
DISH and SoftBank butted heads before when the satellite TV operator tried to wrest Sprint away from the Japanese company. SoftBank prevailed, and it now owns 80% of Sprint. DISH and Sprint also competed to acquire wireless broadband provider Clearwire Corp. After a short but tense bidding war, Sprint bested DISH, buying the rest of Clearwire that it did not own.
The third quarter proved a busy one for wireless M&A, with the closings of the Sprint, SoftBank and Clearwire transactions. The period also saw the year's biggest deal announcement: Verizon's pending $127.5 billion acquisition of Vodafone Group Plc's 45% stake in Verizon Wireless.
Meanwhile, AT&T wrapped up its acquisition of Leap Wireless International Inc., operator of the Cricket telecom brand, giving the nation's second-largest carrier a solid foothold in prepaid wireless.
T-Mobile also gobbled up a prepaid operator, MetroPCS Communications Inc., and embarked on a disruptive "Un-carrier" marketing campaign that has turned its operations around.
Under CEO John Legere, T-Mobile terminated handset subsidies and contracts. The carrier also made phone upgrades easier, gave away free international data roaming in more than 100 countries and 200 MB of data per month for every tablet purchased. The result is that T-Mobile posted two consecutive quarters of subscriber growth after years of losing customers.
Cable
When it comes to cable M&A activity, 2013 saw a multiyear high, but in terms of deal size, not volume.
According to SNL Kagan data, cable M&A announced deal values totaled $6.82 billion on the back of 29 transactions. It is the highest aggregated deal value since at least 2009. But the number of deals, 29, fell below totals recorded in 2012 and 2011. In 2012, cable M&A deals totaled $5.17 billion from 56 transactions.
Dominating cable deals was Liberty Media Corp.'s acquisition of a 27.3% stake in Charter Communications Inc. for $2.62 billion from an investor group that included Oaktree Capital Management LP, Apollo Global Management LLC and Crestview Partners LP.
The second-largest was Charter's acquisition of Optimum West, the former Bresnan cable system, from Cablevision Systems Corp. for $1.63 billion. With the deal closing, Charter CEO Tom Rutledge had bought Bresnan twice, the first time as Cablevision's COO before he left for Charter.
Liberty's investment in Charter marks the return of its chairman John Malone to the U.S. cable industry since selling TCI to AT&T in 1999. At one time, TCI was the nation's largest cable operator. Malone had been active in cable M&A overseas through his Liberty Global plc but not in the U.S. until recently. With an underperforming business, net operating loss carryforwards and the hiring of a well-regarded CEO, Charter was an opportune investment for Malone.
But his return also roiled the M&A waters. Charter, the fourth-largest cable operator, is reportedly in bidding for Time Warner Cable Inc., the second-largest. The other large cable systems are out of reach or not interested: Comcast Corp. is too big for Charter to absorb; Cox Communications Inc. and Cablevision are controlled by their founding families and reportedly do not want to sell.
Charter reportedly has been lining up financing for a run at Time Warner Cable. One rumored scenario is that Charter might partner with Comcast to go after Time Warner Cable. Cox also reportedly is interested in acquiring the cable system.
Cable M&A interest should spill over into 2014 as the Charter-Time Warner Cable saga continues.
www.snl.com
