Networks are blocking dealer acquisitions

Networks are blocking dealer acquisitions
Dealers attempting to sell their own businesses are being hampered by restrictive contract clauses imposed by the networks, a leading financier claimed this week.

Knight Corporate Finance, which deals in telecoms acquisitions, said the restrictive clauses are slowing the pace of deals in a converging market.

The firm singles out ‘Change of Control’ clauses as particularly obstructive. Director Adam Zoldan said: ‘This clause means that if you are looking to sell your business you have to go cap in hand to the networks and effectively request their permission to sell your
own business.’

Zoldan accuses operators of delaying transactions and using the deal as a bargaining chip to grab a greater share of the buyer’s connections. He claims one operator refused to allow a sale, insisting on acquiring the company at a lower value than the previous offer.

The operators’ grip on their dealers even impacts on telecoms firms with only a small proportion of their business in mobile, with buyers factoring in the risk of operator interference and reducing the value of the deal accordingly, Zoldan claimed.

Zoldan called on the networks to ‘cut the apron strings’ to allow ‘a truly competitive environment.’

Operators declined to comment on Zoldan’s claims. However, one network source said: ‘The Change of Control clause allows us to ensure the new partner will do the same job. We are also obliged by Ofcom to carry out due diligence on any new partner to ensure they meet all obligations.’

One dealer said: ‘We look to buy smaller players that are not wrapped up in these terms and conditions. We find that the bigger the company, the more operators look to squeeze more money out of their prospects.’

A telecoms service provider said: ‘There are 500 resellers in the UK and mobile operators are exerting undue influence on the market. This would never have been allowed in fixed-line.’
Written by Mobile Today
Mobile Today

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