* America Movil takes operational control of Telekom Austria
* Sees Austria as base to increase European business
* Will invest 1 billion euros via rights issue
(Adds comment from biographer, analyst, background on Europe)
By Georgina Prodhan and Christine Murray
VIENNA/MEXICO CITY April 24 Mexican tycoon
Carlos Slim plans to use Telekom Austria as a base to
build up his presence in European telecoms after sealing a deal
with the Austrian state to take control of the company.
Slim's America Movil will invest up to 1
billion euros ($1.38 billion) in Telekom Austria via a rights
issue, on top of spending as much as $2 billion to buy out
minority shareholders in a mandatory public offer.
The deal represented the first successful acquisition for
Slim in Europe, where he has invested more than $4 billion in
the past two years, building stakes in Telekom Austria and Dutch
KPN, which subsequently rejected a full takeover offer.
Controlled by one of the world's richest people, America
Movil said it would spend the money from the rights issue on
acquisitions in new markets, infrastructure, research and
development, new products and services.
America Movil's Chief Financial Officer Carlos Garcia Moreno
said the company began looking for opportunities in other
regions two or three years ago and saw Telekom Austria as a
platform for expansion into central and eastern Europe (CEE).
"There came a point where we felt there was just not very
much more to be done in terms of expansion in the Americas,"
Garcia Moreno told a news conference in Vienna on Thursday.
Telekom Austria is in seven CEE countries outside Austria,
but has limited itself lately to modest acquisitions in markets
where it already operates. Garcia Moreno said the company will
consider purchases outside Telekom Austria's existing footprint.
Since Slim entered Europe in 2012, he has been linked to
other possible telecoms investments in countries including
Poland, Serbia, Turkey and Hungary. But America Movil has not
admitted any interest and has made no formal approaches.
Slim's biographer, Jose Martinez, said the tycoon was keen
to snap up whatever he could to establish himself in Europe.
"It's a way of compensating for the measures coming in
Mexico," Martinez said.
America Movil is facing increasing regulation and
competition in Latin America, especially in Mexico, where it
controls most of its home market. Its market capitalization of
$45.4 billion dwarfs Telekom Austria's $4.1 billion.
"Diversifying into tiny Telekom Austria is probably a good
financial investment but hardly enough to offset the more
general malaise," Bernstein telecoms analysts wrote in a note.
Shares in former state monopoly Telekom Austria jumped 6.7
percent to 7.10 euros after America Movil said it would offer
7.15 euros per share for the outstanding stock in an offering to
be made in the next few weeks. The Mexican firm does not have a
fixed target stake in Telekom Austria, Garcia Moreno said.
The shareholder deal signed late Wednesday night combines
Austrian state holding company OIAG's 28 percent of Telekom
Austria with Slim's 27 percent in a syndicate holding structure.
America Movil said it would fund the takeover offer with a
credit line set up for the purpose. OIAG will reduce its stake
to 25 percent plus one share in the rights issue.
Shares in America Movil fell by more than 1 percent in early
trading on the Mexican stock exchange before paring losses.
Under the 10-year agreement, Austrian interests would be
protected by giving OIAG veto rights as well as the appointment
of the CEO and chairman, keeping the company's headquarters in
Austria, and maintaining a Vienna stock market listing.
The agreement came after a turbulent meeting of the OIAG's
supervisory board that lacked a quorum for 12 hours because of a
boycott by labor representatives who criticized its lack of
explicit job guarantees.
"Everything, including the question of how much will be
invested in Austria and how ... will lie in the hands of a
private company that is exclusively focused on profit and is
based on another continent," Werner Muhm, the influential head
of Vienna's Chamber of Labour, said in a statement.
Thursday's news conference was the first time an America
Movil executive had appeared in public in Austria in the two
years since it first acquired a stake in Telekom Austria.
The shareholder agreement, which has not been published,
does not specify how the billion-euro proceeds from the rights
issue would be spent, according to people who have seen it.
Some analysts were concerned at the lack of a clear
statement of how the funds would be used.
"Proceeds could be used to fund a mix of deleveraging,
domestic fibre, and CEE acquisitions. Depending on the mix and
the targets, this could increase or diminish the value of the
company," wrote JP Morgan analyst Hannes Wittig.
Analysts said the offer looked generous, even at a modest 11
percent premium to the six-month moving average. They said it
valued Telekom Austria in line with its peers at about 6.1 times
earnings before interest, taxes, depreciation and amortization
despite its higher risks in CEE and relatively low cash flow.
Doubts persist about what America Movil's plans are.
"It's still not 100 percent clear what their intentions in
Europe are," said Ken Berlin, senior research analyst at Legal &
General Investment Management America in Chicago.
($1 = 0.7231 euros)
(Additional reporting by Angelika Gruber in Vienna and Elinor
Comlay and Dave Graham in Mexico City; Editing by Elaine
Hardcastle, Jeffrey Benkoe, Tom Brown and Cynthia Osterman)