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Telekom Austria eyes Bulgaria's Vivacom

18. January 2012. | 06:03

Source: Sofia Echo Staff

Telekom Austria, which owns Bulgaria's largest mobile carrier Mobiltel, was interested in the acquisition of Vivacom, reports in Austrian media have claimed.

Telekom Austria, which owns Bulgaria's largest mobile carrier Mobiltel, was interested in the acquisition of Vivacom, reports in Austrian media have claimed.

According to Die Presse newspaper, which did not quote any sources, the sole dissenting voice in Telekom Austria's management opposing the deal was chief financial officer Hans Tschuden, who feared a repeat of the Belarus scenario, where the devaluation of the local currency has put the company in difficult straits following the acquisition of a local carrier.

Because Telekom Austria already owned Mobiltel in Bulgaria, its prospective acquisition of Vivacom could run afoul of competition authorities, which is why the Austrian company was contemplating a break-up of Vivacom.

Telekom Austria would keep the fixed-line and broadband business, but spin-off and sell the mobile operations. Since its launch in 2005, Vivacom's mobile operations have struggled to catch up with Mobiltel and Cosmote's unit Globul, languishing at about 12 per cent market share. According to Die Presse, the sale of the mobile business would cover much of Vivacom's acquisition cost.

Despite falling revenues in the fixed-line business, Vivacom, the former state fixed-line monopoly, still dominated the segment. The company was also one of the largest providers of broadband internet, using ADSL technology.

Telekom Austria has already branched out into the broadband business in Bulgaria, acquiring two major Sofia-based internet service providers (Megalan and Spectrum Net) in 2011. Vivacom's acquisition would further broaden Telekom Austria's reach on that market, especially outside Sofia.

Other prospective buyers for heavily-indebted Vivacom include Turkey's biggest mobile phone company Turkcell and its domestic rival Turk Telecom, owned by Dubai-based Oger Telecom, which has made two unsuccessful attempts to buy Vivacom in the past.

Vivacom's debt is now estimated at about 1.65 billion euro, most of it amassed during three successive leveraged buy-outs since privatisation in 2004. It is now owned by PineBridge, the former asset management arm of US insurer AIG bought by Hong Kong billionaire Richard Li.

Restructuring talks with Vivacom's senior lenders, however, make it likely that PineBridge would see none of Vivacom's selling price, while mezzanine lenders stand the risk of having their loans written off entirely.


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