Verizon Announces Acquisition of Yahoo’s Web Assets

As we have pointed out on numerous occasions, as traditional mobile services approach commodity status, operators have become aware that content is king. Content, in fact, is the key to future revenue growth, and in order to have access to that content, operators must either license it or purchase it. Very few telecom players in the world have pockets as deep as Verizon, and given its assets of US $220 billion, the U.S. giant has the ability to spend generously for the assets it needs. The price tag of nearly US $5 billion for Yahoo’s web properties may seem high, but it represents a tiny fraction of the internet company’s one-time valuation of US $125 billion. Yahoo has declined precipitously since its glory days during the first internet boom, but it still has much to offer. In particular, it should significantly bolster the video content portfolio that Verizon began building with its acquisition of AOL. Verizon CEO Lowell McAdam said, “By acquiring Yahoo’s operating business, we are scaling up to be a major competitor in mobile media. Yahoo’s operations provide a valuable portfolio of online properties and mobile applications, which attract over 1 billion monthly active consumer views.” He added, “Going forward, this acquisition will put us in a great position as a top global media company and give us a significant source of revenue growth for the future.” Both Verizon’s cable and mobile businesses can benefit significantly from this acquisition, as long as the operator deploys the content in a way that meets the ever-evolving demands of consumers. But whether the operator can truly compete with Google and Facebook in the realm of content delivery remains to be seen.

Tarifica is the global leader in monitoring and analyzing telecom pricing. Covering hundreds of operators in every region of the globe, Tarifica’s databases of mobile and fixed line data and voice tariffs are among the largest and most in-depth in the world. Tarifica is also a leading publisher of benchmark and other pricing reports, and its analysts are recognized authorities in the telecom industry, relied upon by operators and businesses worldwide for pricing insight and guidance. To learn more about Tarifica, please visit www.tarifica.com 

Vivendi Starts Exclusive Talks With Orange for 80 Percent of Dailymotion

France-based telecom operator Orange and French media company Vivendi have entered into exclusive negotiations over Vivendi’s offer to acquire 80 percent of video portal Dailymotion for €217 million (US $236 million). Orange will retain 20 percent of the company. Dailymotion is the second-largest video aggregation and distribution platform in the world, after YouTube, with over 2.5 billion videos viewed per month. The company had €64 million (US $70 million) in sales in 2014, which represents a 30 percent increase since 2012. If the deal goes through, Orange would use its 20 percent holding to accelerate Dailymotion’s international growth and to boost its content. Orange will use the proceeds of the transaction to finance its efforts in the digital ecosystem. Vivendi’s interest in Dailymotion accords with its strategy of exiting the telecom sector and emphasizing entertainment products. In 2013, Vivendi sold Maroc Telecom to Dubai-based Etisalat. In March 2014 it announced that it would sell French mobile operator SFR to Altice/Numericable, in a deal that has not yet closed. Orange, on the other hand, is dramatically reducing its stake in Dailymotion. However, the company apparently believes that the video service can still be a success despite the fact that it has contracted since its inception in 2011 and has still not turned a profit. Orange CEO Stephane Richard said, “YouTube is 60 times bigger than Dailymotion. It is time to speed up, to continue investing, to find new markets, to anticipate new products and services.” Vivendi Chairman Vincent Bollore said the deal is “a first step in our ambition to create a large, global group that is focused on media and content.” Whether Vivendi is the right partner to make that happen is uncertain, though. The French government put an end to an attempt by Hong Kong-based conglomerate PCCW to acquire 49 percent of Dailymotion, and its motivation appears to be nationalistic in nature. The government wants to keep Dailymotion French, but an Asian partner would be more likely to achieve a more widespread audience for the video service’s offerings. Orange’s stated ambition is to make Dailymotion a worldwide content distribution platform, but currently most of its users are in Europe. In 2013, the French government stopped a prospective sale of all or part of Dailymotion to Yahoo—a rival of Google, which owns YouTube—on the grounds that it is a U.S. company. Tarifica is the global leader in monitoring and analyzing telecom pricing. Covering hundreds of operators in every region of the globe, Tarifica’s databases of mobile and fixed line data and voice tariffs are among the largest and most in-depth in the world. Tarifica is also a leading publisher of benchmark and other pricing reports, and its analysts are recognized authorities in the telecom industry, relied upon by operators and businesses worldwide for pricing insight and guidance. Tarifica is a division of T3i Group, a diversified telecom information provider. To learn more about Tarifica, please visit www.tarifica.com.

CEO: Yahoo Will Spin Off Its Stake in Alibaba

Yahoo chief executive Marissa Mayer said on Tuesday that the U.S.-based internet company would spin off its remaining 15.4 percent stake in Chinese e-commerce giant Alibaba to form a separate entity. Yahoo will not have to pay any taxes on the transaction, which is worth US $39.5 billion, unlike its divestment in September 2014 of a US $10.3 billion portion of the Alibaba stake, 40 percent of which went to taxes. (That divestment took place at the time of Alibaba’s initial public offering.) However, the proceeds of the present deal will go to shareholders and will not constitute a cash fund for future acquisitions. The spin-off is expected to be completed in the fourth quarter of this year.

Alibaba is so huge that Yahoo’s 15.4 percent stake made up almost 85 percent of its value. Nonetheless, the spinoff was long awaited by shareholders and observers, ever since Mayer, former head of the internet search department at Google, took over. Alibaba’s e-commerce is very different from Yahoo’s original core business, digital advertising, which has been sagging recently, despite the exponential growth in the sector worldwide. In 2014 the digital ad market was worth US $146.4 billion, of which Yahoo had only 2.36 percent, compared to Google’s 31.1 percent. The massive spinoff should allow Yahoo to refocus on internet advertising. Other areas in which a slimmed-down Yahoo intends to compete more intensely and effectively, according to Mayer, is in mobile advertising, social media, and video content.

Google has truly invaded the mobile market, with its Android operating system, app content, OTT messaging services and, most recently, its own soon-to-be-launched MVNO. Yahoo has lagged behind Google in embracing and profiting from the mobile revolution, but under Mayer it appears bent on making up for lost time. The spin-off of its Alibaba stake, while it may not provide the company with the wherewithal to do so, at least signals the intention. 

The above item appeared in a recent issue of Tarifica's "The Story of The Week", a weekly report that analyzes noteworthy developments in the telecoms industry from around the world. For past issues or to learn more about The Story of The Week or to contact the Tarifica Research department:  http://www.tarifica.com/contactus.aspx