France Telecom to leave another European market with Orange Austria sale

Hutchison 3G Austria (3GA) is to acquire France Telecom owned Orange Austria, in a deal worth approximately €1.3 billion.

The sale marks the French operator’s second divestment from the European market in recent months.

For the deal to take place, France Telecom has had to enter into a binding agreement with private equity firm Mid Europa Partners, which holds a 65% stake Orange Austria, valued at approximately €130 million. France Telecom owns the remaining 35%, and will receive €70 million from the sale. The remaining €1.1 million is debt.

A spokesman for France Telecom told Capacity that the Austrian sale comes as a result of a review of its portfolio of European assets in 2011. From this review the company concluded that it wanted to leave Switzerland and Austria, where it did not have a majority stake in its operators. He also said that France Telecom’s departure from Austria came as a result of the imminent risk of consolidation in the market.

“Given 3GA’s willingness to play the consolidator’s role, our own appreciation of the risk/reward profile of continuing participation in the market, and our starting position as minority shareholder in OA, we estimated this was an excellent opportunity to be seized,” said the spokesman.

Following the acquisition, Hutchison will immediately sell off 2 x 13.2MHz of paired frequencies, up to 634 base stations and 100% of operator Yesss! Telekommunikation GmbH to Telekom Austria Group. The sale of these combined assets is thought to be worth up to €390 million, and is expected to pave the way for the merger of a stripped down Orange Austria with Hutchison’s 3G Austria.

All aspects of the transaction are subject to approval from the Austrian regulatory and anti- trust authorities.

France Telecom’s planned Austrian departure follows the sale of Orange Switzerland at the end of last year private equity firm Apax Group. The company is also planning a similar sale of its assets in Portugal, where it holds a 20% stake in Portugal Telecom. Regarding its Portuguese operations, the France Telecom spokesperson said: “For the moment we’re just working closely with our partners at Portugal Telecom to find a good exit path that would protect the interests of all parties.” He stressed that there was no urgency in the departure and that the company was just considering possibilities at the moment.

France Telecom announced this week it would be doubling its investment in fibre networks in 2012 to up to €350 million in its domestic market. France Telecom’s CEO, Stephane Richard, assured the French National Assembly on Wednesday that the company would not lower its fibre investments after a predicted loss in revenue from the price war in the French mobile market, sparked by the arrival of Free. France Telecom has pledged €2 billion on its national fibre network, expected to be completed by 2015.

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