Belgacom Announces IPO

Minority holdings in Belgian incumbent to be floated in 2004; government to retain majority stake

October 2, 2003

6 Min Read

BRUSSELS -- The Belgian State, the ADSB consortium and Belgacom (the "Parties") announce an agreement on key objectives for the future development of Belgacom and on a series of transactions, including a transfer of Belgacom's pension fund for statutory employees to the State, that will pave the way for an IPO of Belgacom.

The IPO will enable the Company to pursue its strategy of development and facilitate a sale of the ADSB shares in Belgacom to a broad base of public investors. Belgacom is one of the most successful and financially robust telecommunications operators in Europe and the Parties expect this agreement to further strengthen its position and role in the Belgian economy.

At the request of the State, the Parties have held discussions with three primary objectives:

Review Belgacom's future strategy and define a set of objectives providing for growth and long term development while protecting the interests of its employees, customers and shareholders. The Parties have agreed on the key elements of the Company's mission which endorses their vision for the future of Belgacom including the provision of universal services which will contribute to the reduction of the digital divide. The mission establishes the development of fixed broadband and advanced mobile data services in Belgium as being at the heart of Belgacom's strategy and confirms Belgacom's commitment to its public service obligations;

Establish a corporate governance framework based on best market practice which will provide an efficient operating structure while confirming the Company's obligations to all of its stakeholders. Consistent with Belgacom's first class track record in corporate governance, the Parties have established the guidelines under which Belgacom will continue to create value for its shareholders while meeting its social and corporate obligations. These guidelines notably provide for the appointment of independent Board members at the Board of Belgacom;

Ensure that, in the interests of the Company and its current and former statutory employees, the funding of Belgacom's current and future first pillar pension obligations to statutory employees is fully secured. The Parties have agreed to achieve this through a transfer of these obligations on a fully funded basis to the State.

Building on these and other key objectives, Belgacom and its shareholders have concluded that it is now appropriate for Belgacom to pursue an initial public offering (IPO) providing shareholder liquidity and access for Belgacom to the public capital markets.

To enable the pension transfer, the State will submit enabling legislation to the Parliament as soon as practicable. Following that initiative, from 1 January 2004, the State will assume the legal pension obligations for Belgacom's current and former statutory employees, which are currently borne by Belgacom. On or before 31 December 2003, the State will receive from Belgacom an amount of cash equivalent to the obligations for pension rights accumulated up to 31 December 2003, which have been valued at €5.0 billion. To finance this payment, Belgacom will sell the assets of the Company pension fund before year-end and the difference between these sale proceeds and the value of the obligations as at 31 December 2003 will be financed through borrowings with minimal impact on the Company's financial strength. With respect to the future pension rights that statutory employees will acquire from 1 January 2004, Belgacom will continue to make ongoing contributions to the State. In this way, the pension obligations will be transferred to the State on a fully funded basis.

The IPO agreed by the Parties will involve the sale by the ADSB consortium of Belgacom shares in a global offering to retail investors in Belgium and to institutional investors. The State will remain the majority shareholder in the Company, continuing to provide full support to its future development.

Prior to such an IPO and as a first step to achieving a full exit of ADSB, Belgacom will offer in two separate transactions to use part of its existing cash resources to acquire €1,325 million worth of ADSB's shares in the Company at the IPO price. This share buy-back will reduce the number of shares sold in the IPO, ensuring an appropriate balance between supply and demand in the offering. A portion of the share buy-back will take place in 2003, with the majority being implemented at the time of the IPO. Belgacom will retain these shares up to the maximum 10% legal threshold for future use, including for strategic development and appropriate market-based incentives for its employees.

Following these transactions, the Company will remain one of the least indebted national telecommunications operators in Europe and its statutory employees will have pensions that are fully funded and secured by the State.

As a result of an IPO, Belgacom will benefit from establishing a broad retail and institutional investor base alongside the State, while securing future access to public capital markets. It is intended that Belgacom will be listed on the Premier Marché of the Euronext Brussels stock exchange. Following an IPO, Belgacom will be one of the largest publicly listed companies in Belgium.

Preparations for an IPO of Belgacom will now commence with the aim of completing the process in the course of 2004, subject to market conditions.

Johan Vande Lanotte, Minister of Budget and Government Participations: "Following its significant contribution to Belgacom's development, the ADSB consortium has expressed its desire to sell shares in Belgacom's initial public offering. The pre-conditions have been met for an IPO, which is the best solution to provide Belgacom with a broad and stable shareholder base that will support the Company's long term development."

Lloyd Kelley, Chairman of ADSB: "ADSB is proud of its cooperation with the State and to have helped since 1996 Belgacom to grow into one of the most profitable telecommunications operators in Europe. We look forward to working with the State and Belgacom's management to help position the Company to succeed as a publicly traded entity."

Didier Bellens, CEO and President of Belgacom: "Today's announcement represents the first step towards putting in place an appropriate future capital structure for Belgacom. We thank our shareholders for their support which has been instrumental in the development of Belgacom's successful position.

Looking forward, the flexibility offered by access to the capital markets will help us further develop our full potential as an innovative, efficient and customer led organisation.

The transfer of the pension fund will put Belgacom on an equal competitive footing with respect to other operators. Above all, it will take away a factor of volatility from the financial results of Belgacom.

The IPO will boost the company's operations and will contribute to the building of the "Belgacom of Tomorrow". I therefore consider it to be a federating and mobilizing project for the entire Belgacom Group, whose ambition is to be one of the "best-in-class" operators in Europe."

This does not constitute an offer of securities for sale in the United States, Belgium or elsewhere. Any Securities offered will not be and have not been registered under the United States Securities Act of 1933 and may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements.


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