European Telecom Deals Heat Up

In what could lead to the biggest shake-up of the European telecommunications industry since local carriers fell into a slump five years ago, Telefonica SA of Spain has approached KPN NV about acquiring the Dutch telecommunications operator for about $24 billion. Europe is poised for a broad telecommunications consolidation. Big acquisitions would piece together various businesses across the region, joining companies that offer traditional landline and cellphone services as well as Internet and cable-TV access. Some of Europe's biggest telecom concerns have sought major deals in neighboring countries in recent months for the first time in years. The receptiveness to acquisitions is a shift after the industry all but abandoned consolidation after a global shakeout several years ago. After the Internet bubble burst, telecom companies struggled, discovering they had overexpanded by building far too much capacity for Internet and data traffic that never panned out. Deals make sense now because new technology and increasing competition have turned the fixed-line market into a low-margin business. Telephone services over the Internet, for example, have made formerly lucrative voice calls a commodity. At the same time, increasing competition from new entrants in previously protected markets has driven prices down further.
[SOURCE: Wall Street Journal, AUTHOR: Jason Singer jason.singer@wsj.com and Keith Johnson keith.johnson@wsj.com]
http://online.wsj.com/article/SB112828722122757850.html?mod=todays_us_page_one
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* Merger Mania Heats Up in Europe, While U.S. Buyers Stay Busy
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