WARSAW Deutsche Telekom's talks to buy GTS Central Europe are on the verge of collapse over the price tag, which would at least for now derail the German operator's ambitions to expand in the region, sources told Reuters.
Earlier this year, sources said Deutsche Telekom (DT) was close to completing due diligence on a possible bid for GTS, with Polish telecoms group Netia and Czech fund PPF also interested.
DT is looking to the east European market for possible fixed-line or cable targets as it tries to move away from a mobile-only strategy. At the same time, Europe's No.2 telecoms group by sales is wary of overpaying for assets as it is investing billions of euros in its broadband network in Germany and its T-Mobile U.S. unit.
German media had reported DT was considering buying GTS, which runs a fiber optic and data centre network in Poland, Czech Republic, Hungary, Slovakia and Romania, for 600 million euros.
Two market sources with knowledge of the matter said DT, which owns Poland's No.3 mobile telecom T-Mobile Polska, bid 5 times GTS's core profit EBITDA, which would put the offer at above 500 million euros.
The offer was rejected by Innova Capital fund, which controls GTS, the sources said.
"It's not a must-have asset for DT and that's what they showed with their bid," said one of the sources, who asked not to be named.
"At least for the time being, the deal is off," another added.
GTS closed last year with a 4 percent rise in its EBITDA (earnings before interest, tax, depreciation and amortization) to 103 million euros ($140 million) on revenue of 387 million.
Both Deutsche Telekom and Innova Capital declined to comment on the issue.
(Reporting by Adrian Krajewski and Pawel Bernat in Warsaw, and Arno Schuetze in Frankfurt; Additional reporting by Peter Maushagen in Frankfurt; editing by David Evans)