Carlos Slim expected to swoop on Telekom Austria

LONDON/VIENNA Thu Jan 30, 2014 3:03am EST

Mexican billionaire Carlos Slim attends a presentation of a digital platform, which was created in partnership with the Carlos Slim Foundation and online course platform Coursera, inside Soumaya museum in Mexico City January 29, 2014. REUTERS/Edgard Garrido

Mexican billionaire Carlos Slim attends a presentation of a digital platform, which was created in partnership with the Carlos Slim Foundation and online course platform Coursera, inside Soumaya museum in Mexico City January 29, 2014.

Credit: Reuters/Edgard Garrido

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LONDON/VIENNA (Reuters) - Mexican billionaire Carlos Slim's America Movil (AMXL.MX) is expected to stay ahead of any transatlantic rush into European telecoms markets this year with a bid for majority control of Telekom Austria (TELA.VI), bankers and industry sources say.

Hopes of more consolidation and with it improving margins in European telecoms markets have already boosted share prices in the last year.

While AT&T (T.N) has just ruled out bidding for Vodafone (VOD.L) in the next six months, analysts believe the U.S. group still sees potential in Europe's growing demand for mobile broadband services at a time when competition is heating up in its home market.

But it was Slim who spotted Europe first, making his landfall with the acquisition of stakes in Dutch group KPN (KPN.AS) and Telekom Austria in 2012 and spending 4 billion euros ($5.5 billion) in the process, only to see the value of his stakes fall and a subsequent attempt to take over KPN repelled.

That leaves his sights set on Telekom Austria, and the formation last month of a new government in the Alpine republic should open the way for Slim to start negotiating with the new administration about increasing his stake from about 27 percent, bankers and industry insiders say.

Austria's government owns 28 percent of Telekom Austria via a state holding company, OIAG.

"I expect Slim to make an offer for the majority of the company sooner or later," said one source familiar with the matter. "It could be in two weeks or six months."

Slim, keen not to suffer another rejection in Europe, wants to reach agreement first with the Austrian government to secure majority ownership.

The two sides have had contact but negotiations over a specific deal were stymied by the Austrian elections in September last year and the subsequently lengthy process of establishing a new coalition government.

A pending reform of the OIAG state holding company could, however, still cause further delay.

Asked on Monday on the sidelines of a company event whether ownership questions came up during Telekom Austria's frequent discussions with the America Movil representatives on its board, Chief Executive Hannes Ametsreiter told Reuters: "No. We just discuss business."

Asked about Slim's intentions, he said: "I can't comment because I don't have any information. It's their decision." He added: "We have a very good relationship. It's been like that from the start."

America Movil declined to comment.

RIGHTS ISSUE

One scenario for a possible deal would leave Slim with 51 percent of the share capital, the Austrian government with 25 percent instead of 28 percent currently, while the rest would remain listed on the Vienna Stock Exchange, said bankers and an industry source.

A new share issue, which analysts expect could take place after approval from Telekom Austria's shareholder meeting on May 28, would be an opportunity for America Movil to increase its stake in a politically acceptable way.

At the company's current market valuation of 2.8 billion euros and with a share capital increase expected to be in the region of 1 billion euros, the rights issue alone would not be sufficient to give Slim a majority.

But he could easily use such a share offer to raise his stake to 30 percent, the threshold for having to make a mandatory takeover offer.

Austria, trying to plug a $25 billion budget gap over the next five years, may choose not to spend money on a rights issue and allow its stake to be diluted, although the state has said it is committed to maintaining a blocking minority of at least 25 percent.

Another idea being pitched is for the government and America Movil to pool their stakes in a shareholders' pact, banking and industry sources said.

Such a move would assure the Austrian government of having a continuing say in the company, which is seen as being strategically important for the country, and would prevent America Movil and the OIAG from voting against each other on important decisions.

America Movil's response to the idea has so far been lukewarm, said a source close to Telekom Austria, while a spokesman for OIAG declined to comment.

However, Movil's chief executive Daniel Hajj said in November that no hostile takeover bid for Telekom Austria was planned and he regarded America Movil as a stable partner for the Austrian state.

UNCERTAIN ADVENTURE

America Movil bought most of its Telekom Austria stake from investors Ronny Pecik and Naguib Sawiris in June 2012 for 9.50 euros a share, or more than $1 billion, when the shares were trading at roughly 8.15 euros, and the rest on the market.

Analysts have been puzzling over why Slim is particularly interested in Telekom Austria, which struggles in a fiercely competitive market, other than that the opportunity arose with the sale of the stake held by Pecik and Sawiris.

However, the shares were trading down 1 percent at 6.29 euros on Wednesday and so far America Movil's European adventure has failed to impress its own investors, as the investment to date has increased Movil's debt and hit its profits.

Bankers and analysts have not ruled out a renewed bid for KPN and some predict Slim could look to enter Italy again, where he was blocked from investing in Telecom Italia in 2007.

A senior banker familiar with the telecoms sector said he did not believe the tycoon's ambitions in Europe have diminished. Slim still wants to reduce America Movil's dependence on Mexico, where it earned two thirds of its operating profit in 2012 and where regulatory changes are threatening its position.

"In Mexico, the regulation is changing, politicians have finally decided to act and the competition authorities are following," he said, adding that America Movil's cash flow would suffer.

"Clearly, Europe is his bet for the future."

($1=0.7313 euros)

(Additional reporting by Angelika Gruber in Vienna; Editing by Carmel Crimmins and Greg Mahlich)

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Comments (2)
test

Jan 30, 2014 11:13am EST  --  Report as abuse
Who speculates with Telecom Austria shares? Last quarter their incomes declined seriously on the major markets in Austria, Bulgaria and Croatia. There is certainly a relation with Hoheher bribing nearly all governments in the region. On their net, they though-control the bribed politicians. They control nearly all communications of banks as Raiffeizen and Unicredito and the government.
The problem is that now the scheme is transparent and the brand is with definitely negative attitude. In Bulgaria there are something like 100:1 finding them cheating with billing and arrogant. This is important in modern marketing and customers are leaving. Do you believe that there are 5 mill customers in Bulgaria paying by 8 EUR per month. They should be about 2 million. Telecom Austria is obviously concealing the truth. Increasing the prices of BOB and wage-growth decline are desperate measures showing TA fear of losses in the short run. They expect to compensate with ridiculous price-increase the losses before closing in Bulgaria and Croatia of 200 mill EUR in 2014. In a year the price-sensitive BOB clients will change the operator. Last quarter of the year 2013 their net profit should be close to zero and according to alexa.com with a lot of ads their unique site visits decrease quickly. So is the PE ratio above 40 sustainable with negative net profits in 2014? Do you remember when they sold shares to Slim with asymmetric information and their decline. I do not care for drug money, but think for yours. Do you really believe that 1 billion EUR is the real prize for the frequencies options, because the telecom plays together with the government, the court as well – otherwise there should have been a sentence for former TA CEO admitting bribing major politicians.
As Schumpeter says when there is X-inefficiency from being a cartel in a market for too long, with depreciated human capital, there follows creative destruction. I wish those ideas were mine, but they belong to the Austrian Economist. So do you think the author of the words “if there were not regulators, we would have been like Porsche (So good, – not so expensive)” is Pony or Ponzi? Who do you trust Hans O’tchuden or Hansen with the stock market theory for bubbles (that cause economic crises in economies with leverage) that won Nobel Prize this year.
Carlos Slim, everyone knows where your money comes from – drugs. USA consumes 1g per person per year – so is it like 30-50 USD bln per year? Do not spend your money in Bulgaria, I will take care Mt_e_l to close soon for thought-control of me while in the central bank and organizing the crisis together with EC and ECB for earning 20-30 BLN with the austria banks in the market and there speculations. That left 80% of the Bulgarians poor. So keep your bloody drug money, nobody needs your investments in cartels. The same is with Croatia and even Austria. Telecom Austria goes to history for bribing Ministers, thought-control and speculations in CEE and printing money in Belarus as the consumers and I, Georgi Tchinkov have decided so!

Jan 30, 2014 11:14am EST  --  Report as abuse
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