Fernanda Mello Veiga
KPN and iBasis merger: a truly global operator
Dutch incumbent KPN and Global VoIP operator iBasis have confirmed that they have merged their international wholesale businesses. The merger took effect on 1 October. iBasis receives KPN's Global Carrier Services business (the international wholesale services unit) and $55 million in cash from KPN, in exchange for some 40 million common shares in iBasis. As a result KPN will have a 51% stake in iBasis on a fully diluted basis.The new iBasis will be led by iBasis' President and CEO, Ofer Gneezy, while Edwin van Ierland, former general manager of KPN Global Carrier Services, joins the executive staff of iBasis. Comment: The combination creates a 'new iBasis', with a combined revenue of $1.3bn in 2006, when the combined entity was responsible for carrying over 20 billion international voice minutes (according to TeleGeography). This is not the first time that a traditional telecoms operator has merged its wholesale operations with a VoIP player; in June 2004 Teleglobe bought VoIP carrier ITXC. However, the KPN-iBasis deal differs in the degree to which iBasis will continue to be publicly quoted and KPN ceases to operate its own international wholesale business. In that regard, there are similarities with the merger of the international wholesale businesses of Swisscom and Belgacom into Belgacom International Carrier Services (BICS) in 2005.This merger will shake up the wholesale international voice market for several reasons:- the new entity ranks in the top five international carriers by volume- it shows KPN's commitment to moving to an all-IP network, nationally and internationally- economies of scale will enable the new entity to earn better margins from the cut-throat international voice market- it may hasten further mergers between wholesale operators, which are looking to move more quickly into the VoIP space.The new iBasis will focus on carrying wholesale mobile services (inherited from KPN) and consumer VoIP (the main focus of the old iBasis). Its client base comprises of: national operators, mobile operators, wholesale carriers, calling card players, cable operators and Voice over Broadband service providers. The company will benefit from a greater geographical coverage, which will transform the new entity in a truly global operator, since KPN Global Carrier Services has an extensive coverage area in Europe, the Middle East and Africa, while iBasis focuses on Asia and the Americas.KPN believes that this deal will generate $10m of cost reductions (back-office integration) annually over the medium term. However, we hope that it doesn't take another 15 months (the period that it took iBasis to finalise its financial arrangements) to integrate both companies and benefit from synergies. We continue to watch developments with interest.
