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Euro Carriers Go Xmas Shopping

European carriers are ramping up for a Christmas shopping spree, with BT Group plc (NYSE: BT; London: BTA), France Telecom SA (NYSE: FTE), TDC A/S, Swisscom AG (NYSE: SCM), and Interoute Telecommunications Ltd. all dusting off their wallets.

BT's Italian Job
As expected, BT is to buy out its partners and take control of Italian business services provider Albacom SpA in a deal worth at least €116 million ($154 million). (See BT Moves on Video, Italy.)

The British carrier, which recently acquired international service provider Infonet Services Corp. (NYSE: IN), says taking full control "reflects BT’s strategy of establishing a pan-European presence to service multi-site organisations, with strong local operations in key countries." (See BT Buys Infonet.)

BT also reckons it will "bring visible benefits to Albacom’s customers, allowing them to benefit from the full suite of BT’s products and services and its increased focus on network-based IT services."

Second only to Telecom Italia SpA (NYSE: TI) in the business services market, Albacom holds 11 percent of the data services market. It provides voice, Internet access, and data services to about 240,000 Italian and international businesses, operates a 7,600-kilometer fiber network, and has 1,450 staff (see Cisco to Design Italian Network).

In the 12 months to March 31 2004, Albacom generated revenues of €640 million ($850 million) and a small profit before tax and depreciation. BT's share price edged up 2.5 pence, just over 1 percent, to 201.75 pence on the London Stock Exchange this morning.

Splashing the Cashflow
Pan-European carrier Interoute says its business is growing so fast it might just pop -- or at least pop over to Russia and Scandinavia and buy some networks.

The operator, owned by the Sandoz Family Foundation, says it's growing so fast it needs to hire 100 new sales and marketing staff, effectively doubling that team, during the next three to four months (see Interoute Hires, Plans Expansion).

"And we're hiring them now, not over the next 20 years, like some others do," snipes Nick McMenemy, Interoute's head of strategy and business-critical operations, who says those new bodies will take the total staff to about 500.

That workforce expansion, and the acquisitions Interoute has planned, is all coming from cashflow, says McMenemenemy. "There are other things you can do with your cash. You can put it in the bank or return it to the shareholders. We're putting it straight back into the business and growing it further."

Interoute has already been busy on the M&A trail this year, having bought a solid position in Central and Eastern Europe and expanded its presence in Italy (see Interoute Buys Euro Network and Interoute Buys Fiber-to-the-Pope).

But it hasn't landed all the assets it has wanted (see Interoute Wants LamdaNet Assets, Cogent Adds to Euro Empire, and Band-X Exits IP Market).

So what's next? McMenemenemenemy says Interoute will add more staff in Scandinavia, and is lining up acquisitions in Norway and Russia, though he wouldn't be drawn on whether a merger with Moscow-based Golden Telecom Inc. (Nasdaq: GLDN), a rapidly expanding city and long-haul carrier, was an option (see Golden Expands Its Business Empire).

More likely, and affordable, targets include JSC Central Telegraph, the telecom business of Metromedia International Group, or Golden Line (no relation to Golden Telecom, but well worth checking out for its bizarre website).

Paying By Czech
France Telecom, TDC, and Swisscom are all circling Cesky Telecom a.s., the national operator in which the Czech government is selling its 51.1 percent stake for about €2 billion ($2.65 billion).

The Danes have long expressed an interest in gaining majority control of arguably the most important operator in Central Europe, while the Swiss incumbent emerged as an interested party after merger talks with its neighbor, Telekom Austria AG (NYSE: TKA; Vienna: TKA), broke down in August (see No Merger for Euro Carriers).

Now the Czechs say France Telecom has thrown its chapeau into the ring, though no one is answering the phone at the French carrier to confirm such talk.

Once the Czech government has sold its stake, which could still be done by offering the shares on the stock market if a one-off sale can't be agreed, Cesky plans to start buying up other service providers in neighboring countries such as Poland, Slovakia, and Hungary, though the operator's management hasn't said which carriers it has its eyes on.

Cesky, which dominates the Czech fixed and mobile services markets, recorded revenues of 46.5 billion Czech Koruny ($2 billion) and a net profit of CZK4.5 billion ($194 million) in the first nine months of this year.

— Ray Le Maistre, International News Editor, Light Reading

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