More money than sense?
I've observed a number of times that the incumbent sector looks certain to adopt VoIP as a blunt weapon in the quest for out-of-footprint growth, but if we ever needed any confirmation that European telecom is awash with cash and running short on ideas, we need look no further than the current flap surrounding the auction of a 51.1% stake in Cesky Telecom.
Telefonica has yet to acknowledge that it is bidding, though a Bloomberg story this morning quotes an official related to the auction as saying that Telefonica has bid 502kr per share, and a press release from Swisscom this morning confirms that it bid 481.5kr per share and will not revise the offer (CeskyTelecom closed yesterday at 401.6kr, so both bids constitute a nice premium for control).
Swisscom's press release insinuates that other bidders (I read that as "Telefonica") might break up the company, and also makes clear that it has proposed a secondary listing of Swisscom stock on the Prague exchange to prevent a collapse in liquidity should Cesky be delisted (it is 14.9% of the Prague Exchange). Swisscom is understandably miffed at the direction of the auction, as its geographic location and longstanding interest in acquiring Telekom Austria (I expect largely due to its investments elsewhere in Eastern Europe) arguably make it the only bidder with an obvious strategic rationale for being there. What possible fit Telefonica can see with its other operations is far from clear, unless there's some lost Czech-Hispanic cultural connection that I'm missing.
All this smacks vaguely of industry desperation, and the sense of frustration must be immense. Swisscom is already committed to buying back a very generous amount of stock this year, and others are following suit (KPN has done a fifth of its annual target in the past month alone, and will continue buying through the closed period). All that effort, and yet no one seems to care, judging from performance. Of the 18 STOXX industry groups, telecom is the third worst performer on both short (3-month) and long (5-year) term bases (and it's the only sector to see negative absolute performance over three months), and is bottom quartile on a one and two year view. Maybe investors are sensing, rightly or otherwise, that acquisition criteria in the sector are becoming more fluid as the cash piles up.