) Spanish subsidiary - Orange Spain has acquired Simyo, a mobile
virtual network operator (MVNO) from Dutch telecom giant KPN N.V.
The deal will consolidate France Telecom's position in the
Spanish market where it faces stiff competition from market
As per the deal, the French telecom giant will run the MVNO under
Simyo brand and has promised not to make any changes to the
current tariff and service conditions. This signifies that France
Telecom doesn't have to bear high promotional expenses to
establish a new brand. Simyo has 380,000 customers in Spain and
has fetched $40 million dollars from the Paris-based company.
In July, 2012, KPN had put up Simyo for sale for which it had
also received offers from UK-based
Vodafone Group Plc.
). Notably, offloading the MVNO asset marks the exit of KPN
from the Spanish market.
France Telecom faces tough competition from Bouygues, SFR,
Telecom Italia S.P.A.
) and Vodafone Group in its domestic operations, which account
for more than half of its revenue and profit. This has resulted
in France Telecom losing its market share and recording lower
margins and profitability.
To trim down its mounting loss, the company is reducing its
exposure in the weaker markets and is trying to strengthen its
position in the core markets. In order to fulfill this attempt,
the company could also bid for Yoigo - another Spanish MVNO owned
by Swedish telecom carrier TeliaSonera.
We believe acquiring these MVNOs will only strengthen France
Telecom's position in the Spanish market, which currently has
12.2 million units in Spain. However, continuous acquisition
might strain the company's balance sheet, as there is no
guarantee that these investments would be profitable.
We currently maintain a long-term Neutral recommendation on
France Telecom. Currently, it holds a Zacks #3 Rank, implying a
short-term Hold rating.
FRANCE TELE-ADR (FTE): Free Stock Analysis
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