By Eyk Henning and Dana Cimilluca
FRANKFURT--Germany's Deutsche Telekom AG (DTE.XE) is considering
two transactions in Eastern Europe to strengthen its position in
the region, several people familiar with the matter said.
Europe's largest telecom company by revenue is in talks to take
over GTS Central Europe for about 600 million euros ($775.7
million), three people familiar with the transaction said. GTS,
headquartered in Warsaw, is a broadband optical and IP network
provider and voice and data communications service owned by
financial investors Columbia Capital, M/C Venture Partners, Innova
Capital, HarbourVest Partners, Oak Investment Partners and Bessemer
Venture Partners.
Deutsche Telekom could also come under pressure to purchase the
outstanding 40% stake of its T-Mobile Czech Republic unit that was
recently put up for sale by private equity firm Mid Europa
Partners, one of the people added.
A spokesman for Deutsche Telekom declined to comment. Mid Europa
Partners wasn't available for a statement.
The deals add to the list of clean-up transactions that Deutsche
Telecom is implementing to streamline certain operations and
strengthen its position in specific core markets at the same
time.
Most recently, the company acquired U.S. mobile phone operator
MetroPCS to widen its footprint in the country. It is also
reportedly considering cutting its stake in the U.K. mobile phone
joint venture Everything Everywhere it holds with France Telecom
(FTE.FR) as well as in its online classified advertising unit,
Scout24.
Central and Eastern Europe, in contrast, "has been defined as a
core market for Deutsche Telekom despite the recent economic
headwinds in the region," analyst Wolfgang Specht from Bankhaus
Lampe said. He added it would therefore make sense to strengthen
operations in existing markets.
GTS Central Europe, a leading infrastructure-based provider of
telecommunications services for businesses, recorded earnings
before interest, taxes, depreciation and amortization of EUR103
million on revenues of EUR387 million last year. The company owns
and operates an extensive fiber optic and data center network
throughout Central and Eastern Europe, offering basic voice and
data to complex virtual private networks and managed data center
services.
The timing of deal for GTS, and whether there are other bidders,
is unclear.
The deal with T-Mobile Czech Republic, the largest mobile
telecommunication provider in the country with around 5.5 million
subscribers, is different, as Deutsche Telekom is content with its
60.8% controlling stake it valued at EUR1.75 billion at the end of
last year, people familiar with the company's thinking say.
Deutsche Telekom's preferred option would be another financial
investor to assume MEP's stake, but is ready to buy the stake
should an unwanted suitor emerge, these people say.
Mid Europa Partners, a buyout fund focused on Central and
Eastern Europe and Turkey, has acquired a stake in the holding
company Falcon that holds a minority stake in T-Mobile Czech
Republic in 2006 and purchased an additional stake in the company
in November 2008.
At 1456 GMT, Telkom traded at EUR9.28, up 0.3%.
(Archibald Preuschat in Frankfurt contributed to this
article.)
Write to Eyk Henning at eyk.henning@wsj.com
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