UK market-leader Everything Everywhere is reportedly in talks with banks to finance paying back loans to parent firms Deutsche Telekom and France Telecom, which would mark the first step to establishing itself as an independent entity.
According to the Financial Times, the operator has lined up seven banks to lend it as much as £875 million to repay the loans to its parents, which the newspaper says would be one of the largest new borrowing facilities in the UK this year.
Deutsche Telekom and France Telecom each hold 50 percent of Everything Everywhere following last years merger of their respective UK networks, T-Mobile UK and Orange UK. The operator still uses both brands.
If the operator pays back the loans it is thought that the next stage could see the eventual exit of the two shareholders via an initial public offering of shares or sale, though the report notes that there is no suggestion that either is on the table at present.
Deutsche Telekom and France Telecom funded the company with loans of about £1.25 billion in total. This sum is expected to fall to about £400 million after the planned financing, the report says.
The banks lined up to provide the debt facility reportedly include HSBC, Royal Bank of Scotland, Morgan Stanley, Barclays, Lloyds, Bank of Tokyo Mitsubishi and JPMorgan.
The report notes that Everything Everywhere will also use the relationship with the banks to help it tap the bond market next year to raise as much as £800 million for future corporate investment, according to banking sources. The operator will also raise cash next year via the sale of some spectrum, a requirement of the 2010 merger.
The integration of the two networks has gathered pace in the last few months, which has seen new CEO Olaf Swantee (pictured) streamline his senior management team and announce plans to reduce headcount at the firm by 550 (about 4 percent of its workforce).
Swantee also appears keen to sever ties with the firms two parents. You can only be successful in the UK when you have an independent UK company that is not managed by two headquarters, he told the Financial Times in September.
In the international mobile market wouldn't it be incredibly short-sighted for the UK's largest operator to end up an isolated entity? Perhaps there are less global synergies for the mobile networks than meets the eye and, in fact, such a large player in just one market could function just as well if not better given its own freedom.
I'm not sure why DT/FT would want to offload their UK proposition, though? Surely this is an essential market for any global operator to have a foothold in. Yet when you consider the transaction that took place, the merger of the two companies rather than one buying out the other, it does seem that DT/FT could be bundling their assets into one bag with the hope of spinning it off at a decent price. Exit strategy from the beginning?
I'm not so sure that it matters much from an international angle - at most they'll be missing out on perhaps preferential roaming rates, but I'm not even sure they will miss out on that - for the most part, the different international networks of t-mobile/orange/voda all seem to operate completely independently so I wouldn't be surprised if each subsidiary has to pay full whack to the other for roaming.
They might lose out if they have to drop the Orange/T-Mobile branding because of the public flotation but I would assume they would continue to license them. They're already split off into a different company from the others in the Orange/T-Mobile groups now that they're a joint venture.
As for whether DT/FT would want to offload it - DT seems to be having a tough time at the moment (they even had to flog T-Mobile USA) so they might be looking for a way out. FT has put a lot of effort into the Orange brand to just drop it, though.
Everything Everywhere to go it alone?
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