Pébereau becomes the great consolidator
03 May 2018 |
After little more than a year out of the industry, Alexandre Pébereau has a new company that is buying iBasis and Altice’s wholesale business. He’s looking for more, he tells Alan Burkitt-Gray
Alexandre Pébereau is back in the wholesale telecoms industry after a gap of – blink and you’ll have missed it – just a little over a year since he left Orange. He came storming back into the business in March 2018 by announcing two deals within a few days to acquire two substantial international businesses.
First, his new company, Tofane Global, will buy KPN’s wholesale operation iBasis. Then, the Altice Group, which owns French mobile operator SFR and the former Portugal Telecom, said that Tofane was the sole bidder for its wholesale voice carrier business in France, Portugal and the Dominican Republic.
No price on either of them, but Pébereau says the two deals will push Tofane to a leadership position in the wholesale business. Now he’s looking for more acquisitions for Tofane, which is named after a mountain range in the north-east of Italy.
“This industry needs to consolidate,” he says. “It needs scale; it needs to be more and more global. It is a very competitive sector and at the same time for large carriers – especially European or North American carriers – it is not the core of their activity.”
He means that such wholesale operations are “not the focus of interest” of their parents, yet have to compete on the global wholesale market with the rest of the industry. “It is important to have very competitive costs.”
Hence the opportunity for Tofane. “I really wanted to lead this consolidation and I decided to go and launch Tofane – to create an independent carrier in voice to start with, but also to work in mobile services.”
He has teamed up with Patrick George, a former BICS, Syniverse and Orange International Carrier executive, who says: “iBasis has turned around its mobile data strategy,” he says. “Now on 4G roaming they are one of the top players in the world.” This was one of the key factors when Tofane started discussions with KPN about iBasis. “It’s not only good on voice – but also on mobile data, they’re positioned very well,” explains George.
It’s clear from the conversation that Pébereau and George – described as a senior adviser – have been talking about ideas for some time. When did they start discussions?
“Last year,” says Pébereau. “Clearly we both saw the opportunity of coming back to the market.” George adds: “We met each other as competitors in the early 2000s and then I had the pleasure of working with Alexandre in Orange to help him strengthen the mobile offer of Orange – and from that period on we stayed in contact and Alexandre shared his plan.”
The wholesale business is “non-core for most carriers”, grumbles Pébereau. “The industry is ready for consolidation but with fully independent players instead of large groups.”
Scale is important, but he sees an increased willingness among “all the telecoms players” to look for ways of “carving out” their wholesale business. “I was able to see that everybody was looking for consolidation,” he says. Companies wanted to “be a consolidator” or wanted to let someone else look after their wholesale business.
The iBasis story
KPN led the way by asking for tenders for iBasis as part of its “strategy of simplification and focusing on the Netherlands”, says Pébereau. “For them it makes sense to outsource voice or to sell the department.” KPN decided on its strategy a year ago, he notes.
But hasn’t iBasis shown falling revenues? Yes, he agrees, but that’s a direct consequence of KPN’s selling off operations outside the Netherlands.
“They [iBasis] have never lost money and they still make a lot of money,” he says. “KPN used to be in Germany, Belgium, France, Spain and the UK with an MVNO.” Within “less than three years they concentrated on the Netherlands”, he adds. That drove iBasis’s sales down from €1.4 billion to €700 million, “not because of the performance of iBasis but really a reflection of the parent company’s strategy”.
KPN owned 56% of iBasis until 2009, when the Netherlands company bid for the other 44%. It offered $48 million, but iBasis said that this was “wholly inadequate”. KPN increased its offer from $1.55 a share to $2.25 and the dispute went to court in the US. Eventually KPN paid $3 a share, nearly twice its original offer.
Pébereau left Orange International Carriers in 2016 and set up Tofane the following year. “I found some investors to come with me,” he says, “and we went to several boardrooms to propose to carve out their business.”
But “it was not on the priority list” of most of them. However, KPN had initiated a formal bidding process “and wanted only industry players” to bid for iBasis. “They wanted long-term commitments to contribute to the consolidation and the digital transformation of iBasis – to transform iBasis for the next digitisation era.”
With that deal done, “KPN is going to stand by iBasis and Tofane Global in the long term,” he says. “We have a partnership contract that goes way beyond the strategic plan – it is important to iBasis that the former parent company should stand by its side.”
Who are the investors behind Tofane? “The first funds are my own funds. I put my own money in and the other partners are following. The others are minority partners and they share the strategic vision that we have, that this industry is undervalued because of the voice decline – but the value in the international industry is growing.”
Tofane’s website lists the company’s partners: the investment vehicle of the SCOR group, a reinsurer; Ciclad, a private equity investment firm focused on medium-sized companies, including telecoms companies; and Trocadero Capital Partners, a private equity investor focusing on small and mid-market European companies. Another partner is Les Comptoirs, a French integrated consulting agency.
Pébereau himself is very well connected in the French business and banking world – and not just from his time at Orange. Earlier in his career he spent 10 years with various elements of the Bolloré group, a transport and logistics company whose current CEO is Vincent Bolloré – also chairman of the supervisory board of Vivendi, the largest shareholder in Telecom Italia (TIM).
The younger Pébereau says his own task now is a question of making the value proposition of Tofane clear to investors. “Closing the two acquisitions in the same week is a very good sign for us,” he says. “We are able to attract new investors into our own industry, in our own right, not just as part of something in the international communications industry.”
iBasis brings all the services of mobile data, including Diameter, IPX and GRX as well as wholesale voice. Altice, on the other hand, is just voice. But those services will be built on the iBasis platform. “As we are showing with the Altice opportunity, it is a great platform to build upon. iBasis is the cornerstone of our strategy.”
Tofane’s second opportunity arrives when Altice, having rapidly built up interests on both sides of the Atlantic, including US-based broadband cable operators, decided it was time to backtrack. “Altice decided that they would really focus on their core business and that international wholesale was not core business for Altice,” says Pébereau.
“For them it was important to demonstrate that they could execute a strategy quickly. They ran a very competitive bidding process, limited to industry players.” The process started in October 2017, he adds. The deal howver “is not signed yet”.
But the previous iBasis deal means the for Altice “they will be at the very leading edge of the technology for 4G and then 5G”.
Now, before work starts on future bids, “we have to integrate the two companies. They are the partners of 800 carriers around the world.” The Altice wholesale deal brings relationships with SFR and the incumbent operator of Portugal.
Tofane’s investors “became really interested the moment we were able to show them with the iBasis process that major players such as KPN were and are in the process of carving out their international services”, he says. “The KPN process was the proof of the pudding. They [the investors] have come for the long run. They have an appetite to grow with us for more operations.”
How much are they putting in? How much is Tofane spending on its two acquisitions so far. “The considerations for those two operations are confidential. I can’t share that with you. What we can say is that for future operations we have enough money to finance them – it’s not an issue,” he says.
And will there be more? “Some investors are calling us and saying they are ready to finance the next operations. There is money available for transformation and consolidation. It’s about having a clear business model with a track record.”