Telekom Austria to bid for Belarusian mobile operator

Telekom Austria said on Monday 10 September that it was in talks to buy one of Belarus' largest mobile operators for more than ?1.6 billion ($2.2 billion). If the deal goes through, it would signal that the country's tightly controlled telecom sector is finally opening up to foreign investment.

The Austrian company would not provide any further details of the target, but analysts suggest it could be Velcom, Belarus' second largest mobile operator after MTS Belarus, with a market share of around 40 per cent. Telekom Austria is 25 per cent state-owned. It operates in Austria, Bulgaria, Croatia, the Czech Republic, Lichtenstein and Slovenia.

Speculation started when Austrian newswire APA reported last week that Telekom Austria was looking to spend more than ?1.6 billion ($2.2 billion) on a mobile operator in Belarus. CEO Boris Nemsic had recently expressed an interest in buying another asset in central or eastern Europe worth more than ?2.65 billion ($3.65 billion).

Telekom Austria has been one of the most acquisitive European incumbents in recent years, buying a string of mobile operators in the Balkans as well as Austrian ISP eTel.

But it has lost out on a number of recent auctions in emerging markets.

In December, Serbia's state-controlled Telekom Srbija won an auction for a 65-per cent stake in Telekom Srpske. Its ?646 million ($898 million) bid bested Telekom Austria's offer.

In July, Telenor ASA outbid Telekom Austria subsidiary Mobilkom Austria to acquire mobile operator Mobi 63 with a bid of ?1.5 billion ($2 billion).

In April, its attempts to acquire a controlling stake in Greek operator OTE came to naught when OTE reportedly refused to cede management control to Telekom Austria.

At home, the Austrian operator faces a stagnating market. In the fixed-line sector it is diversifying into broadband services like IPTV, to counter the declining voice business. But Austria's mobile sector is one of the most price-competitive in Europe.

Last month Telekom Austria reported a 3.3 per cent year-on-year rise in Q2 revenues to ?1.21 billion ($1.63 billion) and a 2.7 percent fall in EBITDA to ?465 million ($641 million), owing to high start-up costs in Serbia and Macedonia, where the company is launching mobile services.

However, any bid for a Belarusian mobile operator could put Telekom Austria in competition with some of the big Russian operators targeting the CIS region, driving up the final price.