Exchange, Telecom Deals Prove Antitrust is So 2012

NEW YORK ( TheStreet) -- Whether it is a consolidating telecom sector or a blockbuster Thursday merger proposal between financial powerhouses IntercontinentalExchange ( ICE) and NYSE Euronext ( NYX), the sectors that failed to consolidate last year are betting 2013 is the year antitrust officials back off.

Currently, three multi-billion dollar telecom sector deals face U.S. antitrust approvals by the U.S. Department of Justice and the Federal Communications Commission, and Thursday's $8.2 billion ICE and NYSE merger would face as many as five regulatory approvals around the world. At this time last year, many in the business press might have said the present slate of pending mergers is a reflection of corporations thumbing their nose at feckless antitrust officials.

A lack of hysterics in the proposed exchange's consolidation and a string of telecom deals, which includes T-Mobile USA's merger with MetroPCS ( PCS), Sprint's ( S) merger with Softbank of Japan, and the company's more recent planned acquisition of Clearwire ( CLWR) signal that the facts have changed dramatically in both industries.

At this time last year, investors in both sectors were recovering from AT&T's ( T) failed $39 billion effort for T-Mobile and they were licking their chops for officials in Europe and the U.S. to nix a similar cross-Atlantic merger between NYSE Euronext and Deutsche Boerse of Germany.

Few see antitrust officials playing a heavy hand in a hat trick of telecom mergers and analysts at Berenberg Bank and Stifel Nicolaus said on Thursday a lack of overlap in ICE and NYSE Euronext's disparate trading and clearing businesses make a deal blockage more remote than last year, when antitrust officials also balked at a joint bid between ICE and Nasdaq OMX Group ( NDAQ) for the iconic NYSE.

So what is the difference?

It boils down to a year of deteriorating fundamentals for also-ran U.S. telecom operators and NYSE's unrelenting stock market share losses to off-exchange operators like BATS Global Markets and DirectEdge.

Meanwhile ICE's play for NYSE Euronext and a sketched-out reconfiguration of the telecom sector may also represent more careful planning.

AT&T's M&A effort was widely panned as being a push to turn the U.S. wireless sector into a duopoly, while E.U. officials said the NYSE - Deutsche Boerse tie up raised the prospect of making European stock and derivatives anti-competitive.

A telecom sector revitalized by the recapitalization of Sprint and the expansion of T-Mobile's stong wireless network may play to the favor of consumers, who could see smartphone service improve over the long haul and see phone bills go down as the telecom sector's third and fourth players nip on the heels of titans AT&T and Verizon once more.

In a December telephone interview, Craig Moffett, a telecom sector analyst at Bernstein Research and a noted industry bear said the biggest industry-wide theme of 2013 may be whether a revived Sprint pushes wireless prices down, in a push to regain market share. Both Sprint and MetroPCS - T-Mobile are price competitors to AT&T and Verizon, but a lack of network coverage and subsidized iPhone's, respectively, has caused persistent 2012 market share losses.

For NYSE Euronext, the imperative of consolidation was made bluntly on Thursday. On an earnings call with analysts NYSE executives simply said that the company's diversified business model of international stock and derivatives trading, in addition to technology and clearing platforms wasn't being appreciated by investors.

At Stifel Nicolaus analyst Matthew Heinz, meanwhile, noted a "limited overlap" in ICE and NYSE's businesses and said that NYSE's persistent stock market share losses and its lack of a fixed income derivative centralized clearing platform ultimately beckoned some type of consolidation.

On the M&A call, ICE executives noted that a tour of regulators in five countries was "very well received," and that the proposed merger would "get a lot of support in the market," referring to antitrust officials.

While nothing is a guarantee, 2013 may very well be the year the telecom and financial exchange sector's finally consolidate after few saw sign significant consolidation as possible given recent failed deals and stricter antitrust enforcement in the E.U. and U.S.

In Thursday's exchange merger, ICE's Jeffrey C. Sprecher will continue as Chairman and CEO of the combined company, while NYSE Euronext head Duncan L. Niederauer will be president of the combined company and CEO of NYSE Group. NYSE Euronext would also see four of its board members join ICE's board, which would be expanded to 15 members.

The combined company's headquarters would be in Atlanta, where ICE is headquartered and in New York, home to NYSE.

The prospective merger is expected to close in the second half 2013, and remains subject to shareholder approval and regulatory reviews in Europe and the U.S.

-- Written by Antoine Gara in New York

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