The CEOs of Belgacom and Mobistar have expressed surprise at the price KPN managed to extract from cableco Telenet for BASE, as they hone their responses to the enlarged competitor.
After several years of trying, KPN finally managed to offload BASE, Belgium’s third largest mobile operator, for an impressive €1.3 billion last month.
One analyst described the price as “stellar”, something neither Belgacom CEO Dominique Leroy nor her opposite number at Mobistar, Jean Marc Harion, refute.
Leroy tells European Communications: “Telenet could afford it but it is a high price... one that could not be paid for by someone not in Belgium.”
Liberty Global-owned Telenet saw underlying revenue growth of seven percent in Q1, driven by growth in subscribers, higher ARPU and an increase in mobile subscription revenue.
It has promised to spend €240 million on integration costs and upgrading BASE’s network.
Leroy adds: “A big part of the synergies have been accounted for in the price.”
Mobistar’s Harion says: “It was obvious that BASE would be acquired by a cableco… but [the price] was a surprise, particularly with the amount of capex [Telenet has committed to spending].”
Telenet beat off competition from Altice and Voo to land BASE, which has 3.3 million retail, enterprise and wholesale customers.
Revealing his company’s Q1 results last week, Liberty CEO Mike Fries said the acquisition, which must still get approval from the relevant regulatory authorities, would “secure long-term access to mobile capacity in Belgium”.
Belgacom’s Leroy thinks the deal vindicates her own organisation’s strategy of convergence.
She adds: “In Belgium, it’s very difficult to have three mobile operators that are profitable.”
BASE saw sales decline 2.3 percent last year to €711 million, while EBITDA was down 22 percent to €149 million.
Moreover, Leroy is grateful that the acquirer is not “someone like Free in France who would destroy the whole market”.
But she admits: “The negative is that we now have a competitor that is stronger than before.”
Belgacom will welcome the new competitor from a position of relative strength. Core underlying revenue rose 3.3 percent in the first quarter, with Leroy predicting a return to revenue growth next year.
The CEO has implemented a “fit for growth” strategy since her arrival 18 months ago and says the Telenet-Base deal will not fundamentally change that plan.
“[The deal] will put pressure on us to transform better...we will accelerate what we are doing and do it better,” Leroy explains.
It’s a different story at Orange-owned Mobistar, however, which saw revenues decline over four percent in the first three months of this year.
The mobile operator hosts Telenet’s existing MVNO on its own network.
Harion says he expects Telenet to honour the deal it has in place, which runs until 2017, but says he is confident of the company can compensate for the loss of revenue when Telenet pulls the plug.
In particular, Mobistar is waiting for the Belgian regulator to conclude its investigations into the country’s cable market so it can go on its own journey of convergence.
Following a judgment last November, Belgium’s cablecos must now give wholesale access to their TV and broadband services.
Harion says: “Belgian consumers suffer from a duopoly in the fixed market. Prices for triple pay services are the most expensive in Europe...Telenet, Belgacom increase prices every year.
“We are expecting the regulator to publish ultimate clarification in the coming weeks re wholesale prices.”
As soon as it does, Mobistar plans to launch its own TV and broadband services before the end of the year.
“All the technical work is done, we’ve secured content rights and we’re ready to launch,” says the CEO.
Harion won’t reveal the specifics of their offering but is betting the house on the launch of converged offers putting his company’s revenues on a path back to growth.
Sales were down 4.3 percent in Q1, although the decline is slowing.
Understandably, Mobistar is keen to get the ball rolling before the Telenet-Base deals gets the regulatory green light.
It is not the first time the operator has tried to launch converged offering. In 2010, for example, it launched a TV offering but Harion reveals it didn't fly.
“In the past we have not succeeded in making convergent offers successful,” admits the CEO.
With Belgacom moving in the right direction and Telenet/BASE soon to reinvigorate the market, it could be its last chance to get it right.
An in-depth interview with Belgacom CEO Dominique Leroy features in the Q2 issue of European Communications magazine. Click here to ensure you get your copy