AT&T has been loudly proclaiming its interest in buying into European Wireless for ages. But I am still puzzling to figure out why. There are few obvious synergies and the track record of cross-border telecom M&A is awful (absent naked capital injections like Softbank/Sprint). A few explanations/scenarios below, but I remain mystified. If anyone has a better idea please send it along.
- It is in shareholders’ best interest? Now that we’ve all had a good belly laugh lets move on to serious possibilities…
- US Business Weakness Ahead? Trying to avoid clean YoY comparisons and otherwise distract from the US business. I think this is the most likely explanation. AT&T has no viable M&A targets inside the US. Their wireless business is maturing. Their wireline business is starting to look downright ugly (Residential up a box canyon called DSL. Bread and butter T1 commercial business now under real attack by cable).
- They think there will be a rebound in Europe. Probably some truth to this. The regulatory regime has ground down cross-border charges and markets have stabilized so maybe things get better from here? Of course, AT&T shareholders could just make that investment themselves but then AT&T management wouldn’t be able to claim credit for what amounts to pure asset speculation.
- Some unholy pact with Carlos Slim? I also think there is some truth to this. Slim is under pressure in his Mexican home base and has been trying to buy Dutch telco KPN. AT&T and Slim have a long history of collusive but not illegal behavior. Tough to know what the end game is, but subsequent re-swapping of various assets between AT&T and America Movil to regulatory/monopoly advantage would explain a lot.
- Randall (CEO) is bored? He has always been a dealmaker. Facing a home market with no deal options, maybe he just wants to get back in the saddle? Deals are a lot more fun than actually running a business. And Europe is a nice place to visit.
- Lusting after Vodafone (Ultimate Empire Building)? Underneath it all may be this recurring desire to build the world’s first truly global carrier. Vodafone has been the greatest example of that desire. Vodafones poor performance and general lack of synergies also illustrates why this is a dumb idea. But that is the next CEO’s problem (see prior CEO of Vodafone’s acquisition spree vs current CEO’s unpicking of it).
- The NSA is behind it? Maybe they want a stronger European listening post now that the rest of the world is desperately trying to re-route traffic off of US networks. Certainly the NSA probably wouldn’t complain…
- Risk they might have to return more to Shareholders if they don’t blow some cash? This would be the opposite take on the US business deterioration scenario. Maybe AT&T is hitting a point where they don’t want to invest in the US and need to find some place to dump excess cash in order to avoid paying out too much to those darn shareholders. Much better to build a larger empire for managers.
- Trying to get bigger than Apple/Google? Having given away the mobile store (literally) to Apple, is AT&T trying to regain some leverage? They will still fail, but that doesn’t mean they aren’t dumb enough to try.
- “Lifeboat” Strategy? Perhaps this is about building a big enough “Global Mobile Empire” so managers have a seemly route to spinning off the sinking US wireline business. They can cut and crowding into the new mobile one?
Still scratching my head over this all so if anyone has any great ideas e-mail me. I am happy to re-publish re-written without attribution if its particularly juicy or fun. (grin).
