LONDON -(Dow Jones)- Deutsche Telekom, Friday concluded a deal which will see it buy France Telecom's Orange Netherlands mobile and Internet operations for EUR1.33 billion (US$1.88 billion), as part of a move to consolidate its position in Northern Europe.
Deutsche Telekom's Chief Executive Rene Obermann said he expects the deal to create synergies of EUR1 billion (US$1.4 billion), by combining the networks of Orange's Dutch operations with its own T-Mobile mobile phone business. Around half of the savings will be achieved in next six years, the German company said.
The deal, which has been approved by the European Commission and Dutch works union, is expected to complete by Oct. 1. and will strengthen T-Mobile's position in the Netherlands, where it is currently the third largest mobile phone operator. Orange is the fourth largest operator in the country and, collectively, the two companies have 4.8 million Dutch customers.
"We have promised to focus on growing abroad with mobile communications and are systematically doing so with the purchase of Orange Netherlands. This move clearly underlines our expansion efforts," said Deutsche Telekom CEO Obermann in a statement.
The deal, first flagged in June, follows a counter-deal whereby Deutsche Telekom sold its Spanish Internet operations Ya.com to France Telecom for EUR320 million.
The acquisition marks the retreat of France Telecom from the Dutch market following years of losses at its Orange Netherlands unit, which scrambled to gain market share amid fierce competition from the likes of KPN and Vodafone Group and a host of so-called virtual network operators. Deutsche Telekom said the deal will have no significant effect on its net financial liabilities against earnings before interest, tax, depreciation and amortization. Orange Netherlands - which provides both mobile and broadband Internet services - reported revenues of EUR600 million (US$849 million) last year. EBITDA for financial year 2007 is expected to be EUR120 million (US$170 million) for its Orange Netherlands mobile business. Orange Netherland's had broadband 554,000 customers at the end of 2006.
Collins Stewart analyst Mark James said that, while the deal and price have been flagged for some time, Deutsche Telekom should be able to take around EUR150 million out of its operational and capital expenditures by combining the Dutch T-Mobile and Orange businesses.
By doing so, Deutsche Telekom in the Netherlands should lift its EBITDA margins to around 25% to 30% from the high teens it currently operates in, he said.
Dutch rival KPN should also profit from the acquisition, as it's likely to reduce competition in one of Europe's toughest telecoms markets, said James.
Collins Stewart maintained its buy ratings on France Telecom and Deutsche Telekom, while keeping a hold on KPN.
At 0718 GMT, France Telecom traded flat at EUR23.34, while Deutsche Telekom was down 3 cents, or 0.2%, at EUR13.7. KPN traded up 2 cents, or 0.2%, at EUR12.26.
-By Daniel Thomas, Dow Jones Newswires; 44-20-7842-9264; dan.thomas@dowjones.com
(END) Dow Jones Newswires
Posted to the site on 28th September 2007
Posted to: www.cellular-news.com/story/26328.php