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Analyst: Orbitel acquisition paves way for EPM-ETB merger
(BNamericas.com Via Thomson Dialog NewsEdge)The recent acquisition of Colombian long distance operator Orbitel by Medelln-based municipal telco EPM provides the latter with greater freedom to offer bundled services and can be seen as part of a long-term strategy to eventually merge with Bogot-based ETB, Jos Otero, president of Signals Telecom Consulting told BNamericas.
EPM already had a 50% stake in Orbitel and took full control by buying the other 50% from Grupo Sarmiento and Grupo Valorem for US$85mn.
On announcing the acquisition on Tuesday EPM said the move brought it one step closer to offering a complete portfolio of voice, data and entertainment services both nationally and internationally.
"They are trying to centralize all their operations to have more room to manoeuver in offering bundled services," Otero said.
The merger is also another step in what Otero sees as a gradual road to a complete merger or partial association with ETB, which the analyst believes is the only long-term solution if the companies are to survive competition from Spain's Telefnica (NYSE: TEF). The Spaniards recently entered Colombia's fixed line segment by acquiring 50% plus one share of state operator Colombia Telecomunicaciones (Telecom).
"By acquiring Orbitel it allows them to continue their talks with ETB in terms of forming some sort of joint venture or merging the companies in the future ... so that the two companies can better position themselves against a Telecom that is under the Telefnica umbrella" Otero said.
EPM is already at an advanced stage of spinning off its various telecoms units into a single entity, separate from its water, gas and energy divisions.
The group always envisioned Orbitel as part of the plan, alongside Emtelco, Edatel, EPM Bogot, Telefnica de Pereira, Emtelsa and mobile operator Colombia Mvil (Ola), in which EPM has a 50% stake. Investors holding bonds issued by EPM approved the plan in March this year, and the process is expected to be completed this month.
Orbitel is one of three firms licensed to sell long distance services to the end-user in Colombia, the other licensed carriers being Telecom and ETB.
According to Otero, the fact that Orbitel was managed by private investors was an obstacle to the merger of the two municipally owned companies.
An eventual EPM-ETB merger becomes even more interesting given the speculation that China Telecom may be the future buyer of Luxembourg's Millicom International Cellular (Nadsaq: MICC), Otero said. Millicom is one of the three potential suitors to become a strategic partner for the municipal operators' mobile venture Ola.
"If China Mobile is now with Millicom the whole panorama changes. If they become strategic partners with Colombia Mvil you can expect them to look into other opportunities in Latin America as well," Otero said.
He added that a huge company like China Mobile, which has more mobile subscribers than Telefnica Mviles and Amrica Mvil combined, could give a merged ETB/EPM an important boost in surviving against this Latin American telecoms duopoly.
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