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4-Traders Homepage  >  Equities  >  Xetra  >  Deutsche Telekom    DTE   DE0005557508

DEUTSCHE TELEKOM (DTE)
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Deutsche Telekom buys Austrian cable unit from Liberty Global

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12/22/2017 | 01:56pm CEST
Deutsche Telekom logo is seen during preparations at the CeBit computer fair in Hanover

FRANKFURT (Reuters) - Deutsche Telekom (>> Deutsche Telekom) is buying Austrian cable provider UPC from Liberty Global (>> Liberty Global PLC) for 1.9 billion euros (£1.68 billion) including debt as it adds broadband services to countries where it only offers mobile operations.

FRANKFURT (Reuters) - Deutsche Telekom (>> Deutsche Telekom) is buying Austrian cable provider UPC from Liberty Global (>> Liberty Global PLC) for 1.9 billion euros (£1.68 billion) including debt as it adds broadband services to countries where it only offers mobile operations.

For Liberty Global, the sale is seen as part of efforts to reorganise its operations in the event that merger negotiations with Vodafone (>> Vodafone Group) resume.

With the acquisition, Deutsche Telekom is hoping to challenge the dominance of local incumbent Telekom Austria (>> Telekom Austria AG), which has around 1.5 million fixed-line broadband subscribers, compared to roughly 500,000 for UPC Austria.

The deal comes days after Deutsche Telekom expanded its fixed-line footprint in the Netherlands and signed a letter of intent for Poland. It also comes in the wake of its failure to merge its T-Mobile U.S. (>> T-Mobile US) operations with Sprint in autumn.

Deutsche Telekom, which generates two thirds of its sales outside Germany, will be left with mobile only operations in its largest single market, the U.S., as well as in small countries such and Albania, if the recently struck deals come to fruition.

For their part, Liberty and Vodafone have talked about combining forces as telecoms networks and services converge but have so far only announced a joint venture in the Netherlands.

Vodafone is currently spending 2 billion euros on building out its fixed line network in Germany, but it said in November the investment did not preclude a Liberty deal.

With Brexit only 15 months away, UK authorities are expected to play a larger role in merger control, implying that Vodafone and Liberty will pursue two separate transactions, one for Germany, Netherlands and Eastern Europe and one for the UK and Ireland, analysts from Bernstein said.

"That this (Deutsche Telekom-Liberty) transaction is a prerequisite or a catalyst for the still elusive mother or father of all cable/mobile deals is thoroughly premature in our view," they said.

Vodafone, which does not have its own network in Austria, and Liberty Global declined to comment on merger speculation.

DEAL VALUE

Liberty said it plans to use the proceeds from the sale to reduce debt of the remaining UPC group, which is focused on Eastern Europe and Switzerland, as well as to finance Liberty's share buybacks.

The deal values UPC Austria at about 10 times its estimated 2018 earnings before interest, tax, depreciation and amortization.

Pre synergies, it comes at a 10-14 percent premium to European cable valuations, said Bankhaus Lampe analyst Wolfgang Specht. "Not cheap, but given the strategic deadlock Deutsche Telekom has to accept some premium," he said.

The company said the net present value of potential synergies after integration costs amount to 800 million euros.

"The integration of UPC Austria with its own network as well as TV and entertainment offers will make us a strong competitor to the current market leader, A1, and transform T-Mobile Austria into a completely new company," Deutsche Telekom said.

Liberty Global will also provide certain transitional services for a period of up to four years, mainly network and information technology-related functions, and allow T-Mobile Austria to use the UPC brand for up to three years.

The deal is expected to close in the second half of 2018.

LionTree Advisors was the financial adviser to Liberty Global on the deal, while Deutsche Telekom worked with Credit Suisse (>> Credit Suisse Group).

(Additional reporting by Francois Murphy, Paul Sandle, Christoph Steitz, Mekhla Raina and Sangameswaran S; Editing by Gopakumar Warrier and Keith Weir)

By Arno Schuetze

Stocks mentioned in the article
ChangeLast1st jan.
CREDIT SUISSE GROUP -0.07% 15.275 Delayed Quote.-12.16%
DEUTSCHE TELEKOM 0.00% 13.78 Delayed Quote.-6.86%
LIBERTY GLOBAL PLC -1.92% 28.16 Delayed Quote.-19.89%
T-MOBILE US -1.83% 59.41 Delayed Quote.-4.71%
TELEKOM AUSTRIA AG -0.13% 7.58 End-of-day quote.-1.04%
VODAFONE GROUP -0.92% 178.24 Delayed Quote.-23.45%
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Financials (€)
Sales 2018 74 861 M
EBIT 2018 10 040 M
Net income 2018 4 085 M
Debt 2018 52 481 M
Yield 2018 5,07%
P/E ratio 2018 16,12
P/E ratio 2019 14,07
EV / Sales 2018 1,58x
EV / Sales 2019 1,51x
Capitalization 65 560 M
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Mean consensus OUTPERFORM
Number of Analysts 27
Average target price 16,4 €
Spread / Average Target 19%
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Managers
NameTitle
Timotheus Höttges Chairman-Management Board & CEO
Ulrich Lehner Chairman-Supervisory Board
Thomas Dannenfeldt Chief Financial Officer
Claudia Nemat Head-Technology & Innovation
Michael Sommer Member-Supervisory Board
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