Strategic analysis of the structural separation of a Western European operator

The problem

• A Western European operator was considering the possibility of undergoing structural separation by dividing its organisation into a ServCo (which would provide retail services) and a NetCo (which would provide wholesale services to its retail arm as well as to other operators) – this process also presented an opportunity to sell (a participation in) NetCo at a higher multiple than the one expected if the operator were not structurally separated
• Analysys Mason was commissioned to advise the operator on its strategy to structurally divide its organisation into two separate entities

The solution

• The scope of our strategic analysis included:
  • an assessment of the impact of three different network-opening scenarios on the operator, both at the retail (i.e. impact on competition) and at the wholesale level (i.e. acquisition of wholesale subscribers)
  • validation of the proposed separation model (i.e. NetCo–ServCo architecture) based on an international benchmark of the models adopted by other separated entities
  • analysis of the wholesale prices to be offered by the separated entity based on the characteristics of our client’s national market and a benchmark of wholesale prices charged in other jurisdictions
  • development of NetCo’s business plan, including the identification of new business opportunities

Figure: Overview of the NetCo–ServCo architecture

The result

• We held several meetings with the operator’s board members and the investment bank in charge of the separation process
• The operator used the results of our strategic analysis to obtain internal approval to proceed with the separation process