1. Telecom M&A strikes back
Luca Ferro, Senior Advisor
17th May 2011

2. Telecom * M&A Deal value
In 2010 M&A Transactions in the telecommunications sector have reached almost the pre crisis level...
Telecom * M&A Deal value
2010 has registered a strong increase in M&A deal value (+44% vs. ‘09) with a limited increase in deal number (+6% vs.’09)
Emerging markets** account for ¼ of the total deal value and 10% in volumes
Bln US $
Deal #
683
705
749
Average deal value
(Bln US $)
0,17
0,14
0,19
Sources: Ovum, Accenture analysis
(*) Including Service Providers and Equipment Providers/Vendors
(**) Defined as different from North America, Europe and Asia Pacific

3. ... and 2011 has started pretty well
Recent transactions in the telecom sector
Buyer
Target
(Seller)
Deal type
Value
(Bln US $)
Announce date
AT&T Inc
T-Mobile USA Inc
(Deutsche Telekom AG)
100% stake acquisition
39,0
March 2011
America Movil SAB de CV
Carso Global Telecom SAB de CV - Telmex
99,4% stake acquisition
25,6
January 2010
CenturyLink Inc
Qwest Communications International Inc
22,2
April 2010
VimpelCom Ltd
Weather Investments
22,0
October 2010
Vivendi SA
SFR
(Vodafone Group PLC)
44% stake acquisition
11,3
April 2011
Bharti Airtel Ltd
Zain Africa BV
(Mobile Telecommunications Co KSC)
10,7
March 2010
Telefonica SA
Brasilcel NV
(Portugal Telecom SGPS SA)
50% stake acquisition
9,6
May 2010
Sources: Bloomberg, Accenture analysis

4. Enter new markets together with the quest for economies of scale are often the main reasons for acquisition in the telecom sector...
Achieve economies of scale
Eliminate/reduce competition
Strengthen the core business
Enter new geographic markets
Acquire new technology

5. “Hard” success factors “Soft” success factors
... and Post Merge Integration is always key...
Integration Success Factors
Focus on Value Creation, not integration for its own sake
“Hard” success factors
Take most critical decisions as soon as possible
Run a tight process with strong governance and PMO
Follow the 80/20 rule
Don’t let the synergies escape on their way to the bottom line
Don’t close the window on the world
“Soft” success factors
Don’t underestimate the resource requirements
Realize that Culture matters
Over communicate
Make use of the unprecedented opportunity for change

6. ... to deliver synergies, but their achievement should not be taken for granted
Network
Sales & Marketing
Procurement
Roaming contracts
Network infrastructure
Interconnect/Facilities
Accelerated Network Retirement
Energy Management
Network Supply Chain …
Sales channels optimization
Best practice transfer
Vendor contract rationalization
Devices, accessories, product rationalization
Handset manufacturer marketing subsidies …
Contract / spending optimization
Rationalized supplier network
Strategic Sourcing (Indirect, Network, Terminals)
Logistics Footprint rationalization (Network Equipment, Terminals)
Inventory optimization …
Customer Care IT
Other (Finance, HR, G&A)
Call centre / location rationalisation
Increased expert (process, technology, applications) productivity
Improved forecasting & scheduling
Best practice transfer
Self-Service and 1st Call Resolution
3rd line support
Reduction in application support / maintenance costs, both in-house and vendor costs
Single IT infrastructure, lowering technology TCO
Improved Business Continuity capabilities …
Consolidation of insurance policies decreases risk management fees
HR Policies and Programs
Recruitment function
Personnel Administration function
Benefits Management function
Training function
Shared service centres
Primary difference between base case and upside is in procurement
Opex & Capex synergies
Benchmarks available
Achievable through strict controlling of measures
Revenue synergies
Frequently overestimated
High risk of double counting
Hard to manage and to achieve
Benchmarks not applicable 6
Source: Accenture project experience

7. Supply ChainSupply Chain
Based upon Accenture benchmarks, OPEX synergies could vary between 8% to 32% of the target’s / subsidiary’s operating expenses
Percentage of Target Company / Subsidiary Opex
8-32%
Drivers of Synergies
0-3%
Degree of geographical overlap
Domestic / near shore transactions higher synergy potential
Foreign / overseas transactions lower synergy potential
Operating model – degree and areas of integration
Network and IT standards – degree of compatibility of technology and vendors
Customer demands and brand positioning – degree of similarity of sales and customer care approach
1-3%
1-4%
1-6%
5 -12%
0-3%
CRM
Billing
Network IT
Supply ChainSupply Chain
Corporate
Total
Source: Accenture project experience 7

8. What’s next ? In our opinion M&A activity for the next couple of years will be buoyant and driven mainly by market internal consolidation and cross border acquisition
M&A Drivers
Recent transaction
Possible future deals
Mature markets
Consolidation of networks/ cost reduction
Divestment of minorities/streamline of operations
Market internal consolidation of marginal players
Regional/cross border acquisition
Convergent services/Fixed – Mobile offering
Orange-TMobile in Uk
Vodafone with SFR/China Mobile minorities
Canada (IMECO Telecom and Telephonie Bonne Ligne)
Airtel-Zain Africa
American Movil-Telmex
Telefonica/Telecom Italia
Vodafone Verizon minorities
3 in UK and Italy
India (Idea, Aircel,etc)
Tanzania (4 operators with only 10% cumulated market share)
Nigeria (11 players, only 3 with relevant market shares)
Batelco/Zain Saudi
MTN and MTS as buyers/Essar as a target
France Telecom Vietnam’s interest for Mobifone
Emerging markets