Private equity firm CVC, owner of Swiss telco Sunrise, has reportedly held talks with Providence Equity Partners with a view to a possible merger of operations, should the latter be successful in its attempt to purchase the Swiss wireless arm of France Telecom (FT), Orange Switzerland. According to the Financial Times, sources close the sale claimed that CVC is open to talks with other bidders, but FT is concerned that CVC’s involvement may disrupt the sale. FT hopes to close the sale by the end of the year, or early 2012; final offers are due by 12 December.
One source told the paper: ‘If anyone is trying to condition their offer on a follow on merger, they will fail.’ Indeed, a merger between Orange Switzerland and Sunrise would face major obstacles in getting the deal cleared by Swiss regulators the Federal Communication Commission (ComCom), which vetoed a similar deal in 2009, prior to the purchase of Sunrise by CVC. As noted by TeleGeography’s GlobalComms Database, shortly after CVC’s buyout, the chairman of Sunrise, Dominik Koechlin said ‘I think we could not rule out new talks on a merger between Orange and Sunrise’. However, Swiss watchdogs might revise their previous opposition to the merger if a new market entrant appears during 2012’s technology-neutral frequency auction. ComCom opposed the previous attempt to combine the two alternative operators on the grounds that the benefits to the market of a merger were outweighed by the reduction in competition, as it would leave the wireless sector with just two providers. Both Sunrise and Orange Switzerland, which had market shares of 21.5% and 16.5% respectively at the end of September 2011, are dwarfed by the incumbent Swisscom which at that date represented 62% of customers, and has never held less than 60% of the segment.