T-Mobile says emerging market buys hard

PARIS (Reuters) - Telecom acquisitions in emerging markets are hard to justify in light of high valuations and little scope for saving costs, but the head of German mobile phone company T-Mobile said he would not rule them out.

"Today, emerging markets seem to be hot, everybody wants to get into emerging markets," Hamid Akhavan told the Reuters Technology, Media and Telecoms Summit in Paris on Tuesday.

"But ultimately you will have to pay a premium...nobody is going to hand over control of the business without an additional premium."

Any premium needed to be justified by cost savings, which were sometimes hard to find in emerging markets, he said.

T-Mobile is Deutsche Telekom's (DTEGn.DE) cash cow, which the German telecoms group wants to expand through acquisitions.

Europe's telecoms industry is going through a round of consolidation, with Deutsche Telekom taking a 25-percent stake in Greek operator OTE (OTEr.AT) and France Telecom (FTE.PA) expressing an interest in TeliaSonera (TLSN.ST).

Some financial analysts have questioned the logic of France Telecom's move, saying it represented a search for scale without clearly identified benefits.

SIZE MATTERS

Akhavan said he believed size mattered and that 15 years on, Europe would be dominated by big telecoms groups.

But he added: "You still have to put it in perspective how much you pay for something. It's not at any price that getting bigger is better."

Benefits could include buying power over hardware makers, a better position to negotiate content deals and improved branding, he said.

"You put all of that together and say 'Can I justify a 25 percent premium?' If it doesn't add up to a 25 percent premium...you just have to walk away," he said.

While Deutsche Telekom has successfully pursued acquisitions in Europe and the United States, it is considered to have missed out on growth in emerging markets.

Last year, it bought U.S. wireless company SunCom TI5B.BE and France Telecom's (FTE.PA) Dutch unit, Orange Netherlands.

Akhavan said he would by no means rule out acquisitions in emerging markets but said patience was key.

"I am not saying we are not interested but we have to be patient and wait for the right valuation and opportunities," he said.

Akhavan declined to say whether T-Mobile was interested in Egypt's telco group, Orascom (ORTE.CA), saying only that companies were always looking at each other's business if only to learn how to improve their own.

Asked if global financial conditions had any impact on parent Deutsche Telekom's acquisition strategy, Akhavan said acquisitions may be "a little bit more difficult" but the company's balance sheet was solid.

"We are not limited by the financial stress in the market, we are limited by our ability to create value through acquisitions. If we cannot add value, we will not do it," Akhavan said, echoing comments by Telekom CEO Rene Obermann, who said last week the company was not under pressure to buy.

Sources familiar with the German government's thinking have told Reuters Berlin has been pushing Telekom to expand through acquisitions in the hope of raising its sluggish share price.

Deutsche Telekom stock was down 1.88 percent at 10.94 euros at 1427 GMT, well below the issue price of 14.32 euros. The DJ Stoxx telecoms index .SXKP was down 1.98 percent.

The Government still owns around 30 percent of Telekom.

(Additional reporting by Niclas Mika; Editing by James Regan)

(For summit blog: summitnotebook.reuters.com/)