Telekom Austria Bids for Telekom Srbija Stake

Austrian group wants 51% chunk of Balkan operator

March 21, 2011

2 Min Read

VIENNA -- Today, the Telekom Austria Group (VSE: TKA, OTC US: TKAGY) announced it has submitted a conditional bid in the tender process conducted by the Ministry of Finance of the Republic of Serbia for the sale of a 51% stake in Telekom Srbija a.d., the incumbent telecommunication operator of the Republic of Serbia.

Following a detailed due diligence and evaluation process, the Telekom Austria Group has offered to pay an equity value in the amount of EUR 800-950 million for a 51 % stake in Telekom Srbija a.d.. The offer is, amongst others, conditional to merger control clearance in Serbia resulting in a market consolidation. In addition, this offer is subject to negotiations with the government about certain value creating conditions that will result in an expected enterprise value/adjusted EBITDA 2011 multiple of approximately 4.8x. The Telekom Austria Group committed to capital expenditures of EUR 450 million over a three year period. These investments are part of the business plan which forms the basis of the above mentioned valuation. This offer does not comply with the requested unconditional minimum price of EUR 1.4 billion for a 51% stake.

The conditional offer compares favorably to a share buyback with respect to cash flow generation per share. The bid value will allow the Telekom Austria Group to remain within the targeted leverage range of Net Debt/EBITDA comparable of 2.0x to 2.5x. This means the conditional offer submitted for Telekom Srbija in line with the Group’s existing cash use policy.

Telekom Srbija is the incumbent telecommunication operator of the Republic of Serbia with operations in Montenegro as well as Bosnia Herzegovina, where Telekom Srbija owns a 65% stake in Telekom Srpske. In the Republic of Serbia, the company offers both fixed and mobile services with a 100% market share in the fixed line and 58% market share in mobile communications. In Montenegro, the mobile market shares of Telekom Srbija amounts to 25% while it has a 2% share of the fixed line market. In Bosnia Herzegovina fixed line market share amounts to 35% and mobile communication market share to 39%. In 2010, Telekom Srbija is estimated to have generated revenues of EUR 1,157 million and an EBITDA of EUR 483 million.

Telekom Austria AG (NYSE: TKA; Vienna: TKA)

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