A1 Telekom’s acquisition of Yesss!

I just ran into an article about the recently announced acquisition of Orange Austria by Hutchison “3”. Part of the deal is the subsequent sale of Orange low-end brand Yesss! to market leader A1 Telekom Austria for 390m€. The previously cited article includes some information on Yesss! historical business numbers and they don’t help in explaining the 390m€ valuation.

Here some facts about Yesss!:

  • Customer base (no. of SIM cards): 740.000
  • 2010 Revenue: 56,4m€
  • 2010 Operating CF: 2,37m€
  • 2010 ARPU: 6,71€
  • No. of Employees: 15 (!)

Yesss! is an MVNO and was using the Orange network infrastructure so far. Consequently they also don’t have any major fixed assets that can be acquired. Yesss! annual revenue went down 50% from 2007 to 2010. Taking into account current market dynamics it is hard to imagine any change to this tendency.

So what is it that makes A1 spend 390m€? It would take more than 8 years of full 2010 revenues without any cost to recover the purchase price, so even the argument that A1 will have hardly any fixed cost when running Yesss! (because of lower interconnect fees and already in place network infrastructure) doesn’t help. Next to the Yesss! customer base A1 has also acquired the “One” brand (former brand of Orange) and frequency packages for 900, 2100 and 2600 MHz. So let’s say that Yesss! was worth 50m€, that leaves almost another 350m€ for the frequencies.

A1 shares have had a hard time during the last 5 years, partly driven by failed acquisitions in Eastern Europe that were just made for the sake of growing, but not to add value. As a shareholder of A1 I would be concerned and challenge this purchase. In order to fully evaluate the deal one would need to know how urgent A1 needs the frequencies. In the end they’re not acquiring Yesss!, they’re acquiring frequencies (and this is still subject to regulatory approval).


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