Will US firms clean up in telecoms?
29 March 1999
Colin Long, partner, Olswang
Liz Hiester, partner, Clifford Chance
James Chesterman, partner, Weil Gotshal & Manges
BILLIONS of pounds are being invested in the cable and telecoms industry as the sector continues to thrive amid mergers of colossal proportions.
US cable TV giant Comcast recently announced the purchase of MediaOne in a £37bn stock and debt deal, marking the next stage in the rapid global consolidation of the industry.
In Europe, Olivetti - the Italian telecoms company - last week said it would break all records with a flotation if it succeeded in its £35bn bid for Telecom Italia.
The fees generated for City firms involved in such transactions are vast. So what are the implications for UK lawyers acting on deals in a US-led consolidation of the industry? And are they being beaten to the work by US firms, or is there enough for everyone?
Colin Long, a partner and joint head of Olswang's telecoms group, says: "It is not realistic to suggest US firms are taking all the work.
"Certainly, if deals are being done in the US then local firms will get the work. But in this industry there are massive spin-offs for European lawyers. For example, the European Commission has to approve the deals and there is plenty of work in Brussels for lawyers specialising in regulation, securities exchange issues and merger control work."
"The biggest growth is being seen in the cable and telecoms sector as the result of a convergence of products. The sheer number and size of the deals provides a feeding frenzy for lawyers.
"In relation to the Olivetti deal, UK firms have more alliances in Europe than US firms and can therefore make a credible pitch for the work. There is something for everyone."
However, he warns: "More than ever, today lawyers need to be up to speed with the client's business and be aware of the sector-specific issues."
It is a view shared by Liz Hiester, a partner at Clifford Cha-nce's media and communications group: "In the telecoms industry, the pace is so fast lawyers need to respond to a business that is evolving all the time.
"Telecoms companies can ring up tomorrow with a new idea, and lawyers have to keep pace with these developments. The firms that have expertise will thrive, as will lawyers who mark out a niche."
Hiester does not believe US firms are taking all the work, even though she accepts: "the consolidation in the industry is being driven by the US".
Hiester continues: "Clients will seek the assistance of local firms, together with firms that can provide relevant expertise in the area.
"However, few firms can service the needs of these companies, which is a problem specific to this sector."
James Chesterman, a partner at Weil Gotshal & Manges, says: "The deregulation of controls in the industry for the main telecoms companies is driving profits down and providing the impetus for companies to expand across various countries.
"This inevitably results in a flurry of cross-border merger and acquisition work for lawyers.
"It also raises very detailed issues about competition, and regulatory issues for which only a few firms are capable of combining the necessary skills," says Chesterman.
He says the big five firms will be able to respond to the financing aspects of these deals, "but it is the US firms that will come in and lead the transaction as they will have a closer relationship with the multinational companies within the jurisdiction.
"However, you don't need to have an office in every jurisdiction. If you have good local contacts, then that will suffice. A one-stop shop doesn't always provide sufficient resources."
Chesterman believes branding may be an important issue for the banks, "but it is certainly not a fait a compli for M&A lawyers".