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| Deutsche Telekom Weighs Polish Fixed Lines, Slovak Buyout |
| Bratislava, 23.05.2011 |
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| May 23 (Bloomberg) -- Deutsche Telekom AG, which agreed to sell its T-Mobile USA wireless unit for $39 billion in March, may acquire fixed-line assets in European markets such as Poland to help stem customer defections in the region.
Europe's biggest phone company is evaluating whether to add traditional phone-line or broadband businesses to its mobile operations in Poland, the Netherlands and Austria, said Roland Mahler, the head of Europe excluding Germany. Deutsche Telekom is in talks to buy the 49 percent stake it doesn't already own in Slovak Telekom AS with the local government, he said.
“Fixed-mobile convergence is a precondition to be able to leverage the market and certainly to serve the customer best by offering fixed, broadband, TV or IPTV,” Mahler, 62, said in Warsaw in an interview. “In the integrated markets we see the customers want exactly that kind of full-fledged proposition.”
Chief Executive Officer Rene Obermann needs to revive sales in eastern Europe to meet a target of boosting profit margins and returning Europe excluding Germany to growth by 2013. Polska Telefonia Cyfrowa, the Polish wireless company Deutsche Telekom fully controls after a decade-long fight for ownership with Vivendi SA, is the Bonn-based company's biggest standalone national wireless division outside Germany and the U.S.
Polish Targets
Potential takeover targets in Poland include Netia SA, Telefonia Dialog SA and Exatel SA, said Pawel Puchalski, a Warsaw-based analyst at Bank Zachodni WBK SA. The companies compete with Telekomunikacja Polska SA, the France Telecom SA unit that is Poland's biggest phone company.
Netia, whose investors include Third Avenue Management LLC and ING Groep NV, gained 0.2 percent to 5.51 zloty at 9:16 a.m. in Warsaw, giving it a market value of 2.1 billion zloty ($750 million). Telefonia Dialog and Exatel aren't publicly traded. Deutsche Telekom fell 0.8 percent to 10.43 euros in Frankfurt.
“The market would like to see PTC together with Netia, but it would be quite a big expense,” Puchalski said.
The sale of T-Mobile USA to AT&T Inc. leaves Deutsche Telekom focused on Germany and southern and eastern Europe. First-quarter operating profit fell in all European markets except Germany and the Czech Republic. The region had an adjusted margin of earnings before interest, taxes, depreciation and amortization of 33.3 percent, compared with 39.7 percent at the German business.
Permanent Successor
To ramp up cross-selling and reduce the reliance on a surge for mobile data products, Deutsche Telekom has followed Germany's example and begun combining traditional phone and broadband lines and mobile-phone offers in other European markets. The move would allow pushing new products such as Internet TV, sold in Germany as “Entertain,” bolster revenue per user and increase customer loyalty, Mahler said.
Mahler last month replaced Guido Kerkhoff, who left to become chief financial officer at ThyssenKrupp AG. Mahler, who took the role on an interim basis as Deutsche Telekom looks for a permanent replacement, led T-Mobile Czech Republic from 2000 through last year, turning the unit into the most profitable of all national divisions.
While buying fixed-line assets in Poland is “a valid option,” Deutsche Telekom will focus the next six months on completing a rebranding, announced last week and effective from June 5, that will see the blue Era marque replaced by T-Mobile's magenta logo used across Europe and in the U.S. PTC, the third- biggest mobile-phone operator in Poland by subscribers, competes with Polkomtel SA, whose owners are aiming to complete a sale next month.
Slovak Telekom, OTE
The Polish, Czech and Slovak units are at the forefront of a nascent turnaround in the region as prices are starting to stabilize or rise in some markets, said Mahler.
“They can't just stop the macroeconomic and regulatory woes in the region, but it's in their hands to control costs and hold on to customers,” said Stephan Thomas, who helps manage about 16 billion euros ($22.5 billion) at Frankfurt Trust including Deutsche Telekom shares.
Deutsche Telekom is “a little bit more hesitant” to increase its 30 percent stake in Hellenic Telecommunications Organization SA, also called OTE, because of the recession in Greece and a lack of government cooperation, Mahler said.
Greece plans to sell its 20 percent OTE stake this year as part of a 50 billion-euro asset sale program. It has the right to sell 10 percent to Deutsche Telekom by the end of the year.
The Slovak state has said it wants to divest a stake in Slovak Telekom in the next two years to cut the budget deficit.
In Romania and Greece, “the situation is so severe” that it may take longer than until 2013 for sales to begin to recover, Mahler said in the interview.
Local Managers
Deutsche Telekom will address the “strategic challenge” to decide whether to get into the fixed-line market in Austria and the Netherlands, he said.
The European unit accounted for 34 percent of Deutsche Telekom's net revenue in the first quarter, excluding T-Mobile USA, and for the same share of adjusted Ebitda. It lost 7.5 percent of traditional phone connections and 2.5 percent of mobile-phone subscriptions in the period from a year earlier.
The German company is placing more eastern European managers in leadership positions. Mahler is broadening cost- reduction efforts beyond joint purchasing to include unified customer relationship management, shared IT support and common accounting standards.
“We have to convince the national companies that a common platform is needed, that it's the right one and also that it comes at the right cost,” Mahler said. “It does not work if a headquarter wants to apply a push approach. You have to make your offers attractive enough that the national companies are going to go for it.”
--With assistance from Maciej Martewicz in Warsaw. Editors: Simon Thiel, Kenneth Wong
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Address : Euro-Brew Ltd., Hlboká 22, 917 01 Trnava, Slovakia
Tel. : +421 33 53 418 53, Fax : +421 33 53 418 52, E-mail : info@eurobrew.sk |
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