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Africa, Middle East set to become M&A hotspot

2007 lacked telecoms mega-deals, private equity strong up to credit crunch, according to PwC research; sovereign wealth funds poised to be major players.

Africa and the Middle East are set to become a hotbed of telecoms merger and acquisition activity, while deals in mature markets showed a significant decline in 2007, according to a new report published by PricewaterhouseCoopers Tuesday.

"As consolidation in the developed markets of the U.S. and Western Europe appears to have largely played out for now, it will be Africa and the Middle East that will see the greatest growth and potential for acquisition and consolidation," said Philip Shepherd, partner and TMT strategy leader at PricewaterhouseCoopers.

Shepherd's statement backs up comments from Arthur D. Little recently; the firm said it doesn't expect to see pan-European consolidation for at least another three to four years. 

Still, the PwC report conceded that the decline in part stems from the fact that 2006 was a bumper year for high-value deals, specifically deals exceeding €10 billion. These included AT&T's €58 billion acquisition of Bell South, and the €25 billion demerger of Viacom.

According to the research, the total global disclosed deal value plummeted to €185 billion in 2007 from €332 billion in 2006, while the volume of deals fell to 1,190 from 1,260.

Shepherd said that funding conditions in the first three quarters of 2007 favoured a high level of private equity-driven M&A activity, right up until the recent credit crunch.

"Private equity transactions led the way reaching a high of nearly 30% of the total value, but this activity has all but ceased now," commented Shepherd.

Yet, he said to watch out for the sovereign wealth funds of some emerging markets.

"The largest funds from Abu Dhabi, Singapore, China and Kuwait have collective investment funds if more than €4 trillion which could reach €15 trillion by 2010. With the depth of available funds and strategies that are driven by the requirement to diversify, these may emerge as major players," said Shepherd.

However, operators in the Middle East have already been aggressively pursuing growth opportunities across the region as well as in Africa.

For example, Kuwait-based Zain, formerly known as MTC, successfully bid for a mobile licence in Saudi Arabia for $6.1 billion last June, and in October acquired 75% of Ghana's Westel for $120 million, bringing its presence in sub-Saharan Africa up to 15 markets.

According to PricewaterhouseCoopers, deals in emerging markets across Eastern Europe, Latin America, the Middle East and Africa have been steadily growing as a proportion of global M&A activity, making up 22% of all deals in 2007, compared with 11% in 2004.

Источник: Total Telecom

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