TI agrees EUR1.11 billion fee for TIM Hellas

4 Apr 2005

An acquisition vehicle controlled by private equity funds Texas Pacific Group and Apax Partners Worldwide has today signed a conditional agreement with Italian holding company TIM International to buy the latter’s 80.87% interest in Greek wireless operator TIM Hellas for EUR1.114 billion. The deal, which is conditional upon it receiving the necessary approval from the regulatory and competition authorities, prices the Greek cellco at EUR16.43 per share – a 17.6% premium on TIM Hellas’ six-month average ADR price based on current exchange rates; it is expected to be completed by July 2005. TIM Hellas had 2.32 million mobile subscribers at the end of 2004, down marginally on the 2.4 million it claimed at the start of the year, a market share of 21%.

Under the leadership of Marco Provera, TIM International’s parent, Telecom Italia (TI), is currently refocusing its strategic efforts on developing operations in its home market, as well as expanding its activities in the broadband sector overseas. It plans to use the proceeds of the TIM Hellas sale, expected to generate a capital gain of EUR432 million, to cut debt and fund acquisitions. While trimming back its activities in operations outside of Italy, Turkey and Brazil – its three primary markets – TI is also looking to expand its portfolio of international broadband operations. Along with Germany and the Netherlands, the Italian telco is targeting France for future expansion and has moved to buy Liberty Surf, an ISP controlled by Tiscali with around 800,000 subscribers, for between EUR250 million and EUR300 million. Elsewhere, TI is also in the throes of taking over its 86% owned domestic mobile arm Telecom Italia Mobile.

Industry analysts concur that from a financial point of view the sale of TIM Hellas makes sense, as it frees up funds to allow it to trim debt. However, from a strategic perspective, the Greek wireless market represents good potential for future growth in coming years as the European economies continue to come closer together. Two months ago TIM Hellas reported total operating revenues of EUR839.8 million for 2004, up 3.9% year-on-year, and a 3.1% rise in service revenues to EUR785.5 million, despite a 31% decrease in fixed-to-mobile interconnection tariffs and the small fall in subscriber numbers. The rise in total operating revenues was attributed to a 29.6% increase in monthly fees, due to the popularity of the company’s bundled-minutes packages, higher mobile-to-mobile (M2M) interconnection revenues (up 34.6%), and increased handset sales, which rose by 16.5% year-on-year to EUR54.3 million. EBITDA for the full year fell by EUR32.1 million to EUR243.6, primarily the result of a lower contribution from fixed-to-mobile interconnection and one-off costs associated with rebranding, the company’s Mobitel case and compensation expenses relating to a share capital increase in November 2004.

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