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Telekom Austria Buys MDC Stake

Telekom Austria acquires 70% stake in Belarusian mobile operator MDC

October 3, 2007

3 Min Read

VIENNA -- The Telekom Austria Group (VSE: TKA, OTC US: TKAGY) today announced that it has agreed to acquire a 70% stake in Cypriot SB Telecom Limited held by Mr. Ead Samawi and his partners for a corresponding enterprise value of approximately EUR 730[1] million, subject to approval by the relevant antitrust authorities. SB Telecom is the sole owner of the Belarusian mobile operator MDC. The transaction values MDC at approximately 5.9x08E EBITDA. Furthermore Telekom Austria Group has also entered into a call and put option agreement related to the remaining 30% stake exercisable in the fourth quarter 2010 for approximately EUR 3201 million. Mr. Ead Samawi will remain chairman of SB Telecom Limited, all executive management positions in SB Telecom and MDC will be nominated by the Telekom Austria Group, which will have full operational control. Telekom Austria Group will acquire the stake in SB Telecom through a subsidiary of its mobile communication arm, mobilkom austria.

Telekom Austria Group has also agreed on a performance based deferred consideration. The amount of the deferred consideration, which is payable in the fourth quarter 2010, will be directly linked to the future financial performance of MDC and may increase the enterprise value to 6.5x10E EBITDA. In return, the Telekom Austria Group has full access to the free cash flow and dividend distributed.

“The acquisition of MDC is the consistent execution of our strategy for profitable growth in Eastern- and South-Eastern Europe, it offers us an entry to the attractive telecommunication market in Belarus while the terms of the transaction once again underline our disciplined approach to expansion. After the successful integration of the highly profitable Bulgarian market leader Mobiltel we once again engage in a similar transaction and increase our addressable market by approximately 30% to 44 million inhabitants in the countries Telekom Austria Group is present” says Boris Nemsic, CEO of Telekom Austria Group and CEO of mobilkom austria.

MDC, which markets its mobile communication services under the brand names “Velcom” for postpaid services and “Privet” for prepaid services, is the number 2 operator in Belarus with a market share of approximately 42% and more than 2.7 million customers in a market that reached a penetration of 66% as of June 30, 2007. For 2006, the company generated revenues of approximately EUR 2633 million and EBITDA of approximately EUR 1593 million. The net income for the period was approximately EUR 833 million.

The acquisition of the 70% stake in SB Telecom Limited will be financed using existing credit facilities. “We have sufficient financial headroom to fund the transaction with existing credit lines and expect no negative influence on our current rating. As the strong free cash flow allows for rapid deleveraging we will resume our share buy back program once we have reached the level of 2.0x net debt/EBITDA”, states Hans Tschuden, CFO of Telekom Austria Group. The acquisition is accretive on earnings per share from 2008 on and will have no impact on Telekom Austria Group’s stated dividend policy of distributing 65% of net income.

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