Private equity firms eye Carphone and NTL
Published: 17 Aug 2006 10:40 BST
Private equity firms are rumoured to be circling both mobile phone retailer Carphone Warehouse and uber-ISP NTL.
According to a report in The Times, NTL is in the cross-hairs of an unnamed private equity outfit willing to pay £10bn for the ISP, which merged with rival Telewest earlier this year.
Since that deal the company's performance has been lacklustre, with the latest set of quarterly results showing nearly 20,000 customers ditching NTL's services. The company's share price has also tumbled by some 20 per cent since the merger.
One industry expert said of the potential buyout: "Private equity can only move in to buy something if the market gives it its realistic valuation… If a major asset-rich company has a drop in value it's not a surprise private equity should take an interest."
However, the combined company is still the UK's biggest ISP with over two million customers — which may be why private equity firms are eyeing it, according to Ian Fogg, analyst at JupiterResearch.
"When you look at the potential buyer, they want to go in and buy an asset they can then improve. There's a tremendous management job to be done [at NTL] — they would have to take three different organisations with three different products and push them forward. They think they have the expertise to do that."
NTL was approached in a separate offer by a pair of private equity firms late last year but their overtures were rejected. The ISP said at the time the approach had undervalued the company, angering some shareholders.
NTL may be a riper target this time around. As well as its lower share price, the company is also facing an increasingly competitive marketplace. According to broadband watchers Point Topic, access prices are falling at their fastest since mid-2002.
NTL representatives could not be reached for comment.
Carphone Warehouse declined to comment on the rumoured private equity offer led by Archie Norman, ex-Asda chairman and now at , who had previously attempted to buy rival mobile retailer Phones4U.
According to David Carey, senior writer at investment news weekly The Deal, the telecoms industry is set to experience a resurgence of interest from private equity groups.
"Six or seven years ago huge amounts of money were poured into telecoms when the demand for broadband was thought to be 'limitless' and it didn't materialise," he said. "It was really a debacle but now the market seems to be attracting renewed interest. There are established companies with strong markets and sales and that's the kind of thing that attracts private equity."
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