FT staples better terms to Switzerland sale

11 Oct 2011

France Telecom (FT) is attempting to ease the sale of its Swiss unit by pre-arranging a financing package for potential bidders, reports Reuters. FT is courting banks such as Credit Suisse for a ‘staple financing’ deal as an incentive to prospective buyers, hoping to detract from the concerns raised by naysayers regarding the profitability of the unit. Doubts have been cast on the divestment of Orange Switzerland, mainly as a result of the high asking price of EUR1.5 billion (USD2.03 billion), and the upcoming reallocation of wireless spectrum which will require the successful buyer to immediately invest additional funds in renewing the company’s licence.

In addition to the poor timing of the sale, Switzerland’s wireless market has long been problematic for FT, with the cellco struggling to gain ground against larger, entrenched rivals. According to TeleGeography’s GlobalComms Database, between June 2010 and June 2011 Orange Switzerland’s subscriber base has increased by only 0.8%, whilst its main rival the incumbent Swisscom increased saw 3.9% growth over the same period. As a result, Swisscom’s share of the mobile market has never fallen below 60%, whilst Orange Switzerland has been unable to lift it share to 20%; at the end of June 2011, Orange represented 16.5% of the market, while Swisscom held 62.1%.

Switzerland, Salt (Switzerland)