US Telecom on European Buying Spree
The company also has two other acquisitions underway in Germany, and "we have some operations there on our own, including some retail," said Michelle Wolf, vice president for investor relations at World Access.
World Access, she added, used to be an equipment company, but it sold off all but one of those enterprises and bought several long-distance providers. It now has facilities around the world.
Corporate strategies call for rapid acquisition of smaller telecoms across Europe and bundling them into a sizeable pan-European company that could be sold to a major European player in the telecom business.
"We want to consolidate the retail telecom services market with particular emphasis on the SME (small and medium-size enterprises) market, a segment that is typically underserved by incumbent PTTs in Europe today," she said.
"That used to be the case in the U.S. when we had 2,000 small alternative telcos and went through a three-year consolidation period when these companies were consolidated into bigger and bigger companies."
She cited Worldcom as a U.S. example and said, "We see the same kind of opportunities in Europe today, where a very fragmented group of telcos serves the SME market. We want to take that group and roll some of these guys up.
"We expect to put a few of them out of business," she said. "That's just the competitive natural selection. We'll buy existing businesses with good customer bases, good product offerings and good sales forces and integrate them, and then hope to sell this off."
World Access has two acquisitions pending in the United States, both with a strong German presence. Star Telecommunications, which the company bought for $650 million, should close in September, the same time as the Teldafax deal. A deal for World-x-Change was concluded last December.
"We're building to sell," Wolf said, "but in the meantime, we will be in business to extract as much internal growth as we can. We would like to be in the Internet access, DSL, mobile, fixed and wireless business."
While Germany is obviously the most important market, World Access plans to replicate the approach across Europe. It already has sales in nine countries and operations in 15. Wolf thinks it will take two years to complete the project.
"Consolidation opportunities in Europe are happening quickly, we think," she said. "So you had better step in and play over the next couple of years or you will miss the opportunity, and we will move as quickly as we have to."
The company has considerable infrastructure on the ground through FaciliCom, a subsidiary headquartered in the United States that owns a European fiber optic network with switching sites across the continent.
Another subsidiary, LDI, owns netnet, a brand name that markets telecom services to business customers in nine countries. The idea is to put the acquisitions on the back of the network, integrate sales and back office operations "and create a substantial business customer base," Wolf said.