AOL Europe Sale

So, it looks like AOL France is going to be sold to Neuf Cegetel for around €300m for 600k broadband customers. No details of revenues or profits are given. This will act to further consolidate the French consumer market around 3 providers: France Telecom, Illiad and Neuf Cegetel. Apparently, the French business of Tele2 is also up for sale. LLU is acting now as a catalyst in several markets to make the fixed-line division more of an oligopoly. James Enck wrote a great piece yesterday about the consolidation going on the Netherlands. I’m less depressed than him over the situation and feel oligopolies are a natural economic consequence of any industry which needs large infrastructure investments. The only way around the situation is to break-up the telcos with regulated NetCos and free market ServeCos. In the long run, I believe the EU will try to legislate this as the industry structure. The Telco2 Disintermediators have lined up an EU bureaucrat to speak at a forthcoming conference, although I'm sure he will be holding his cards extremely close to his chest.

In the UK, the exit of AOL from the access business also spells further consolidation with the purchase by any of the three short-listed parties: CarphoneWarehouse, Orange and BSkyB. As a ball-park guesstimate if we double the French figure for 1.2m customers which gives a sale price of around £400m. I can’t see CPW affording this without putting more equity into the business – will TimeWarner take shares as payment? Otherwise I think CPW will be dangerously leveraged and I think some of the players will be quite happy to exploit this weakness. Also, I can quite easily see Orange buying Bulldog’s customer base and LLU infrastructure if they are unsuccessful in the AOL process.

I really don’t know enough (currently) about the German market to comment.