DT ends spending freeze with PTC purchase

26 Aug 2003

Deutsche Telekom has ended a three-year self imposed spending freeze by offering EUR1 billion to acquire the 51% of Polish cellco Polska Telefonia Cyfrowa (PTC) it does not already own. According to the German company, however, the deal does not signal that it is actively seeking other acquistions. Indeed, the company has been at pains to reassure investors that the deal will be neither earnings dilutive nor endanger its target of cutting net debt to between EUR49.5 billion and EUR52.3 billion by the end of the year. The German telco has made the all-cash offer to Polish electricity utility Elektrim and France’s Vivendi Universal; the offer comes at an opportune time for Vivendi which has made no secret of the fact that it is looking to make EUR16 million of asset sales this year in order to focus on its domestic operations. According to Kai-Uwe Ricke, Deutsche Telekom’s CEO, the offer will remain on the table until 5 September.

PTC is Poland’s largest wireless network operator, boasting some 5.6 million customers at the end of June 2003, translating to a market share of approximately 36%. The company has been EBITDA profitable since 1997 and as such a buyout would leave Deutsche Telekom’s debt-cutting targets unchanged. In a statement DT’s chief financial officer Karl Gerhardt Eick claimed his company would not be making any increased offers, confidently predicting that Vivendi and Elektrim will be agreeable to their approach. The move is being seen as an attempt by Europe’s largest telecommunications company to bolster its position in eastern and central Europe’s wireless market ahead of Poland’s entry into the European Union next year.

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