What’s up with… United Group, Vodafone UK/Three merger, Microsoft

• Bidders form a queue for €8bn United Group
• BT weighs in on proposed Vodafone UK/Three merger
• Azure for Operators hit hard as Microsoft scales back its telco focus

In today’s industry news roundup: European service provider United Group is attracting a growing list of suitors; BT submits weighty tome to highlight its opposition to the planned Vodafone UK/Three merger; Microsoft’s Azure for Operators is reportedly suffering major job losses as the tech giant’s strategic focus shifts to AI; and much more!

Investment firm BC Partners is inviting companies interested in acquiring its majority stake in European network operator United Group to make non-binding bids in July, according to Bloomberg. Speculation that BC Partners is ready to offload its stake in United Group, the multicountry telecom and pay-TV service provider that has operations across south-east Europe (Bulgaria, Serbia, Croatia, Bosnia and Herzegovina, Slovenia, Greece, North Macedonia and Montenegro) and which generates annual revenues of €2.8bn, have been swirling since the start of the year, with Middle East giants e& and STC (Saudi Telecom) identified as potential bidders. According to Bloomberg, private equity firms Apax Partners and Warburg Pincus are mulling bids for the business, which BC Partners reportedly values at about €8bn including debt. In addition, Orange and the Telekom Austria Group, both of which already have operations in south-east Europe, have been approached about their potential interest, as has Xavier Niel’s Iliad Group, which is always looking for suitable assets to add to its telecom operations portfolio.   

Pressure is growing on the UK’s Competition Competition and Markets Authority (CMA) to reject the proposed £16.5bn merger of Vodafone UK and Three. The CMA is currently in its Phase 2 investigation into the merger and has already expressed its concern that reducing the number of infrastructure-based telcos in the country from four to three could “leave consumers and businesses worse off”. Now the CMA has published responses from interested third parties including a 40-page missive from BT, which noted that if the merger goes ahead as proposed, it will give Vodafone/Three “disproportionate share of capacity and spectrum, unprecedented in UK and Western European mobile markets, which will substantially lessen competition and deter investment,” and also “result in direct harm to BT’s ability to compete.” The CMA is set to share an initial ruling by 12 October. 

Microsoft’s attempt to build a cloud-based telecom network functions business based on its acquisitions of Affirmed Networks and Metaswitch appears to have failed, with the tech giant having decimated its Azure for Operators unit as part of a headcount reduction in its cloud business as it focuses its efforts on AI. According to Business Insider (subscription required, but referenced in this Reuters article), up to 1,500 Azure for Operators staff are to be axed. It will need to retain some staff because while it hasn’t been very successful, it does have some industry engagement, particularly with AT&T as a result of the US operator’s 2021 decision to hand over management of its 5G core to the tech giant. In addition, it has brokered multiple telco partnerships that involve Microsoft supporting cloud-based functions on Azure infrastructure, a more traditional hyperscaler approach to the telecom sector. Apart from the job cuts, what will the fall-out be from this decision by Microsoft to step back from, essentially, being a telecom sector vendor? Affirmed’s focus was the mobile core, where the traditional mobile vendors (Ericsson, Huawei, Nokia, ZTE) continue to rule the roost, with Mavenir being the most prominent challenger in a market that is suffering a bit of a slump currently, according to research house Dell’Oro Group: One of the other challengers, Casa Systems, recently sold its cloud-native core platform to Lumine Group as part of a bankruptcy court sale process after Casa went under. As for the Metaswitch side of things, industry analyst Diane Myers expects Ribbon Communications and Alianza to be the main beneficiaries of its demise.       

Neutral host datacentre operator Vantage Data Centers has added to the capital it raised earlier in the year and now completed a $9.2bn equity investment led by DigitalBridge Group (the company’s main investor) and Silver Lake (its original founder). Together with the €1.5bn investment by AustralianSuper announced in September 2023, aggregate new investment in Vantage during the past nine months has reached about $10.7bn. The company will use the money to invest in its growth across North America and EMEA (Europe, Middle East and Africa) regions,    “accelerating and extending the company’s strategic capabilities to partner with global hyperscalers in meeting unprecedented cloud and AI demand.” The company now owns or controls more than 25 sites in North America and EMEA totaling more than 3 gigawatts of expected capacity. “As part of the company’s investment plan, the new funding is expected to accelerate further growth by driving an estimated $30bn of additional development,” it noted in this announcement. 

Reuters reports that Vodafone Group is reportedly seeking to sell its 21.5% stake in Indus Towers, a wholesale operator of about 220,000 mobile towers across India, for $2.3bn. The giant telco reportedly plans to use the proceeds of the sale to help reduce its debt pile, which currently stands at about €33.2bn ($35.5bn). As you’d expect, all of India’s main mobile operators, including Reliance Jio, Bharti Airtel and Vodafone Idea (in which Vodafone Group holds a minority stake), are tenants of the towers operated by Indus, which also counts Bharti Airtel as an investor. Vodafone Idea is in the middle of a massive fundraising exercise so it can build out its 5G network and, as we have reported, pay its dues to Nokia and Ericsson.   

South Korean operator KT has broadened the use of its AI-enabled VOC (voice of the customer) system, dubbed AI-VOC portal, to help improve the quality of its customer engagement services. The portal gathers anonymised customer interaction data and analyses, summarises and monitors it using KT’s very large language model (LLM) called Belief. According to this announcement (in Korean) from the operator, it can “quickly share approximately 3 million customer inquiries and complaints every month with relevant departments through the AI-VOC portal, and can easily provide response-related information” that can then be used to ”improve the quality of customer service.”

Tech industry research house GlobalData has identified Telefónica as a leader in the global enterprise managed mobility services sector. According to the operator, GlobalData analysed and positively rated the service provider’s ”professional services for public administrations and large companies, as well as [its] advisory and consulting services,” and focused on Telefónica’s “new commercial proposition around 5G for use cases that includes robots, drones, and remote support, as well as mobile security as an important differentiator.” Read more. 

- The staff, TelecomTV