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Rumor: Sistema Eyes Telekom Austria

Ray Le Maistre
3/29/2010

Russian giant Sistema JSFC (London: SSA) is mulling a takeover bid for Telekom Austria AG (NYSE: TKA; Vienna: TKA), according to a report in Austrian daily newspaper Krone.

The report, picked up by Reuters, suggested Sistema would be prepared to pay well above the €4.5 billion (US$6 billion) market valuation the carrier achieved at the end of last week (March 26). The operator's share price has risen by more than 3 percent today to hit €10.25 ($13.82), giving it a capitalization of €4.72 billion ($6.36 billion).

Sistema is Russia's largest conglomerate, owning businesses in multiple sectors, including financial services, travel, oil and gas, pharmaceuticals, and many others, in addition to telecom services. It currently owns: Mobile TeleSystems OJSC (MTS) (NYSE: MBT), a major mobile operator in Russia, Eastern Europe, and Eurasia; Russian broadband operator Comstar United Telesystems JSC (London: CMST); and mobile startup Sistema Shyam TeleServices Ltd. (MTS India) in India. (See MTS Exec: Partners, Processes Key to Success, MTS Reports Q3, and MTS India Signs Up for Advanced CDMA.)

The Russian giant is looking for other growth markets in which to invest, and Telekom Austria could provide a ready-made package in that respect, as it has been building up a portfolio of GSM operations in expanding Central and Eastern European markets such as Belarus, Bulgaria, Croatia, Slovenia, Macedonia, and Serbia. In addition, of course, such an acquisition would also provide cashflow and next-generation network experience from a mature European market. (See Telekom Austria Reports 2009, MWC 2010: Hannes Ametsreiter, CEO of Telekom Austria, Telekom Austria Goes for Ericsson IPTV, and Mobilkom Launches HSPA+.)

That portfolio would dovetail nicely with MTS's existing operations in Ukraine and Belarus, and provide a further base upon which Sistema's VP in charge of telecom and media, Ron Sommer, can build. (See Sommer Time for Sistema.)

— Ray Le Maistre, International Managing Editor, Light Reading

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