Merger mania!
It was a pretty busy year in terms of telecoms-related M&As. On the operator side, the biggest regional buyout was Telstra’s $697 million acquisition of Pacnet, announced in late December 2014 and completed in April 2015. The deal doubled Telstra’s customer base in Asia, and increased its network reach and data center capabilities across the region.
However, the acquisition went somewhat sour in May after Telstra revealed it had discovered that Pacnet’s corporate IT network had been hacked less than two weeks before finalizing the acquisition - and that they hadn’t been told about it until after the deal was signed off.
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Telstra group executive of global enterprise services Brendon Riley told Fairfax Media that while the incident didn’t affect the deal or diminish its value, “It would’ve been good to know about it a little earlier.”
Telstra reportedly considered legal action in May against the three investment management companies that arranged the Pacnet sale for failing to disclose the hack, but so far there’s been no movement on that front.
However, Telstra did strike a deal in November with Singaporean cloud and data center provider DeClout to sell off Pacnet’s assets in Singapore and Thailand for a combined $4.4 million because they did not align with Telstra’s strategy to grow in the SMB segment.
On the vendor side, the biggest deal was Nokia’s acquisition of Alcatel-Lucent in an all-share deal valued at €15.6 billion ($16.9 billion).
First announced in April and expected to be completed by the end of Q1 2016, the combined entity will feature four networking business groups: mobile networks, fixed networks, applications/analytics and IP/optical. The new Nokia will also be designed to have a common sales organization across business groups. The company would have six unit leaders focusing on operational issues, all drawn from the current Nokia.
Ovum analyst Daryl Schoolar commented that despite concerns over both companies’ track record with mergers -’one can easily argue if Nokia’s past hookup with Siemens and Alcatel’s merger with Lucent had gone better, this deal would not be taking place” - the combined entity does give Nokia the scale to compete in the RAN space and strengthens its portfolio in areas like small cells/hetnet and SDN/NFV.
As part of that deal, Nokia also revealed plans to create a new joint venture combining Nokia China with Alcatel-Lucent Shanghai Bell. Under the terms of the proposed arrangement, Nokia will own 50% plus one share of the joint venture. Nokia and Alcatel-Lucent would also be entitled to fair value compensation for the assets they contribute to the JV.
Other M&As of note:
- Infinera acquired Transmode in a deal worth $350 million, combining Transmode’s metro packet-optical applications with Infinera’s long-haul and metro cloud solutions.
- Keysight Technologies purchased Anite for approximately $600 million in cash in a deal that supports Keysight’s strategy to grow in wireless and expand its software offerings.
- Ciena purchased Cyan in a deal valued at $400 million, giving Ciena a serious boost in SDN capabilities and advancing its strategy to deliver a complete on-demand solution for virtualized networks and services.
- Redknee bought billing vendor Orga Systems, which declared bankruptcy earlier this year, for about $42.5 million, adding the Orga portfolio to the NSN assets it acquired in 2012.
- Ericsson acquired video encoding firm Envivio for $125 million to further strengthen its position in the rapidly changing TV and video sector.
- Amdocs acquired a substantial majority of Comverse’s business support systems (BSS) business unit assets for $272 million in cash. Amdocs said the acquisition would expand and diversify its customer base, particularly in Asia Pacific, Latin America and Europe, and including Europe’s cable and satellite market. Comverse, which is in the progress of divesting its assets, said it will continue to exist as a separate company, with a focus on expanding its global market leadership in digital services.
- Intel acquired programmable logic device vendor Altera in an all-cash transaction valued at about $16.7 billion. The acquisition will couple Intel’s products and manufacturing process with Altera’s FPGA technology. Intel said the combination is expected to enable new classes of products that meet customer needs in the data center and Internet of Things (IoT) market segments.
- Verizon announced an agreement to buy AOL for about $4.4 billion in cash, a 17% premium for AOL’s stockholders.