BELARUS NEWS AND ANALYSIS

DATE:

03/10/2007

Telekom Austria sees MDC buy earnings accretive as of 2008, no impact on rating

VIENNA, Oct. 3, 2007 (Thomson Financial delivered by Newstex) -- Telekom Austria AG's (OOTC:TKAGY) purchase of Belarusian mobile phone provider MDC will be accretive on an earnings per share basis as of 2008 and is not expected to impact either the company's credit rating or its stated dividend policy, the Austrian telecom's management said in a conference call.

While Telekom Austria said that it will not disclose the MDC deal's likely total purchase amount including deferred consideration components at this time, it characterized an analyst's estimate of 1.8 to 1.9 bln usd as a 'ballpark figure.'

Earlier today, the ATX heavyweight announced that it agreed to acquire a 70 pct stake in Cypriot SB Telecom Ltd, the sole owner of Belarusian mobile phone operator MDC, for an enterprise value of some 730 mln eur and that it has an option on the remaining 30 pct of MDC, which is exercisable in the fourth quarter of 2010 for around 320 mln eur.

The closing of the MDC purchase is expected in the fourth-quarter of 2007, with the Belarusian unit's results fully consolidated and its executive management positions nominated by Telekom Austria as of today's signing, the company's management said in the conference call.

Telekom Austria said it will resume its share buyback programme once its net debt to EBITDA level once again reaches a multiple of two, a development it expects will happen rather soon given the group's strong fee cash flow.

In response to analyst questions on additional acquisition plans, chief executive Boris Nemsic said he expects Bosnia-Herzegovina's legislature to put forward a draft of its telecom privatisation plans during the course of this month, but thinks that the tender process is unlikely to start before the end of the year.

Chief financial officer Hans Tschuden said that the telecom group retains sufficient financial headroom for additional projects, but will decide on whether to pursue either new acquisitions or further share buybacks on the basis of which promises to be more accretive.

According to Tschuden, Telekom Austria is financing its acquisition of MDC using existing credit facilities, including 1.4 bln eur in committed lines, as well as additional 'substantial' amounts in non-committed lines.

Standard & Poor's (NYSE:MHP) Ratings Services today confirmed its 'BBB+' rating and stable outlook for Telekom Austria, saying it expects the company to return to the boundaries of its financial policy within the next 12-18 months through its strong domestic free cash flow generation.

Source:

http://money.cnn.com/news/newsfeeds/articles/newstex/AFX-0013-20008049.htm