Update: CommScope has confirmed that it has agreed to a deal with TE Connectivity.
The Wall Street Journal is reporting that CommScope wants to buy TE Connectivity’s telecom network business for roughly $3 billion. This would be a huge purchase for CommScope. The broadband equipment giant has roughly $4 billion in annual sales, with the wireless industry accounting for almost two thirds of that. TE Networks had sales of $2.6 billion for the year ended last September, excluding its submarine unit which is not expected to be part of the deal. Overall TE Connectivity had almost $14 billion in sales for the same period. The company also serves the aerospace, automotive, energy and medical industries, among others.
“CommScope has overlap with much of TE’s Networks unit,” said analyst Simon Leopold of Raymond James Equity Research. “CommScope competes with Telecom Networks in its wireless segment and competes with Data Communications and Enterprise Networks in its Enterprise segment. The overlap is imperfect because a significant portion of the TE Telecom Networks goes into telco central offices and fiber to the home (FTTH) applications by our estimate, with no comparable products from CommScope.”
Those “imperfect overlaps” may be one reason CommScope is interested in buying the TE Connectivity unit. TE Networks could give the North Carolina company more exposure to markets in which CommScope has room to grow.
DAS (distributed antenna systems) may also be a driver of this deal, if it materializes. CommScope is the market leader here but TE Connectivity has been an early mover in digital DAS. AT&T, one of CommScope’s key customers, has been pushing vendors to use the CPRI interface to reduce the need for attenuation, and this aligns with TE Connectivity’s approach to DAS.
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