Latin America may see M&A activity among midsize telcos in 2012 (Business News Americas)

Latin America is unlikely to see much consolidation of large telecoms incumbents in the near term, but could see some M&A activity among smaller providers, Michael Wheeler, executive VP of NTT America's Global IP Network Business Unit, told BNamericas.

Feb 23, 2012 | Bookmark and Share |

The executive underscored some high level acquisitions of telecoms providers in the US, such as Level 3's (Nasdaq: LVLT) purchase of Global Crossing, CenturyLink's acquisition of Qwest and Savvis and the acquisition of Terremark by Verizon (NYSE: VZ).


The Global Crossing and Terremark deals will have some impact in Latin America, given those companies' presence in the region.


Wheeler said acquisitions were being driven mainly by difficult financial times for those companies. But given the need to remain competitive, the companies must expand both their scale and scope of services, which is quicker and easier to do through acquisitions than by building greenfield networks or launching untried services.


In Latin American countries like Brazil, for example, much of the consolidation that was pending has already taken place, such as Oi's takeover of Brasil Telecom, Telefónica's (NYSE: TEF) taking control of Vivo (NYSE: VIV) and Telmex's buying Embratel.


"I don't see a lot of activity in the core telecoms space. There's been a lot of activity in Brazil with the acquisition of GVT by Vivendi some time ago, and you have some activity with the Algar Group [CTBC]. I think there is a next level down that could be interesting," Wheeler said.


By smaller players the executive was referring to alternative exchange providers and MVNO licensees, for example.


"So there are a few companies in that US$100mn-500mn revenue space that could be interesting. But I highly doubt it will be one of the bigger incumbents like Oi. They can grow new markets without necessarily having to acquire them," Wheeler said.


The full interview with Wheeler will be available for subscribers in this week's Telecommunications Perspectives.