AT&T (NYSE: T) is mulling purchases in Europe as a way to extend its wireless presence in a new market, but any deal could potentially also help the telco enhance its wireline business services unit.
Overall, the Europe, Middle East and Africa (EMEA) region contributes almost 60 percent of telco's international business sales. In Europe, the company serves multinational corporations with six Internet data centers in the U.K., Germany, the Netherlands and France.
Citing people close to the matter, the Wall Street Journal reported AT&T is looking at more potential prospects in the U.K., Germany and the Netherlands. A deal could come before the end of the year.
Potential targets include Everything Everywhere, the U.K. mobile operator owned by France Telecom, and Deutsche Telekom or Dutch incumbent telco KPN.
This is not the first time AT&T has pursued international acquisitions, as the Journal reported it shopped for deals in India and tried to acquire a stake in Telecom Italia.
What's making European carriers a more attractive prospect is the ongoing economic crisis and competition, which may lead to lower prices.
While AT&T won't announce its Q4 2012 earnings until Jan. 24, strategic business revenues, including cloud and Ethernet, grew 11.4 percent in Q3 2012. Overall total business data revenues grew 0.6 percent year-over-year as the company's business customers continue their transition from legacy data products to next-generation data services.
A key area where a European acquisition could enhance AT&T's international wireline holdings is the Ethernet services market.
Already a dominant U.S. Ethernet provider, AT&T has trailed others like Orange Business Services, COLT (LSE: COLT.L), Verizon (NYSE: VZ) and BT (NYSE: BT) on the international Ethernet services front. Vertical Systems Group, which tracked mid-2012 global providers, ranked AT&T fifth in its mid-year Global Ethernet Leaderboard.
The other question is how any potential European investment will complement or interrupt the company's domestic U.S. network upgrade plans. In November 2012, AT&T announced Project Velocity IP (or VIP), a $14 billion network upgrade of its wireless and wireline networks in the United States.
- the Wall Street Journal has this article (sub. req.)
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