O2 Sells Dutch Operations

mmO2 has sold its Dutch subsidiary, O2 Netherlands to Greenfield Capital Partners, an independent private equity and corporate finance group with existing interests in the fixed telecoms sector, for US$26.8 million in cash.

In the year to 31 March 2002, O2 Netherlands had a turnover of US$314 million, with an EBITDA loss of US$80 million and an operating loss before goodwill and exceptional items of US$187 million.

mmO2 expects the sale to result in a provision for loss on disposal in the order of US$2.2 billion which will be treated as an exceptional item in the year ended 31 March 2003. The sale proceeds will be used to fund the operations of the ongoing core businesses of the Group.

At the time of its interim results last November, mmO2 indicated that a number of options for the future of O2 Netherlands were being considered. Today's announcement follows a comprehensive review of the highly competitive, five-player, Dutch market. The review highlighted that, whilst O2 Netherlands is expected to deliver positive EBITDA in the second half of the year ended 31 March 2003 and to be close to EBITDA break-even for the full year, it lacks the critical mass to fit the Group's value creation strategy in the longer term.

Peter Erskine, chief executive officer of mmO2, said: "We believe that this deal is in the best interests of mmO2 shareholders and also represents a good opportunity for the Dutch business, its employees, customers and suppliers going forward. The Greenfield offer enabled us to sell at a realistic valuation given market conditions in the Netherlands. We remain focussed on our strategy of delivering organic growth and continuing to improve the operational performance - and, therefore, the value - of the Group's businesses in core markets."

Stef van Doesburg, partner of Greenfield Capital Partners, stated: "Today's agreement opens up an exciting new future for O2 Netherlands, its customers and employees. The business is complementary to our existing telecoms portfolio which includes Enertel NV, the number two dial-up telecoms operator in the Dutch market. This acquisition supports our overall strategy of investing in companies that offer a competitive range of fixed and mobile services."

Going forward, the disposal will result in a slight improvement in mmO2's EBITDA margin. There will be a minimal effect on the Group's revenue and absolute EBITDA.

The network will now rebrand back as Telfort, a brand name that it only recently ditched in favour of the O2 brand."

Posted to the site on 15th April 2003