BELARUS NEWS AND ANALYSIS

DATE:

04/10/2007

Telekom Austria Group Enters the Belarusian Mobile Communications Market

By Raju Shanbhag
TMCnet Contributing Editor

The Telekom Austria (News - Alert) Group has agreed to acquire a 70 percent stake in Belarusian firm Cypriot SB Telecom Limited.

The company will acquire the stake in SB Telecom through a subsidiary of its mobile communication arm, Mobilkom Austria. This acquisition is subject to approval by the relevant antitrust authorities. The company has also entered into a call and put option agreement related to the remaining 30 percent stake, which is exercisable in the fourth quarter 2010.This acquisition is subject to approval by the relevant antitrust authorities.

With a market share of approximately 42 percent and more than 2.7 million customers in a market, Mobilkom is the number 2 operator in Belarus. The company markets its mobile communication services under the brand names "Velcom" for postpaid services and "Privet" for prepaid services. The Belarus market recently reached a penetration of 66 percent as of June 30, 2007.

Boris Nemsic, CEO of Telekom Austria Group and CEO of mobilkom Austria said, "The acquisition of MDC is the consistent execution of our strategy for profitable growth in Eastern- and South-Eastern Europe, it offers us an entry to the attractive telecommunication market in Belarus while the terms of the transaction once again underline our disciplined approach to expansion. After the successful integration of the highly profitable Bulgarian market leader Mobiltel we once again engage in a similar transaction and increase our addressable market by approximately 30 percent to 44 million inhabitants in the countries Telekom Austria Group is present."

The Telekom Austria Group will finance the 70 percent stake in SB Telecom Limited with the existing credit facilities. The company does not expect any negative influence on its current rating due to this action as it has sufficient financial headroom to fund the transaction with existing credit lines. The company plans to restart its share buy back program once it has reached the level of 2.0x net debt/EBITDA.

Telekom Austria Group will also make a performance based deferred consideration and the amount of the deferred consideration will be directly linked to the future financial performance of MDC. The amount is payable in the fourth quarter 2010 and it may increase the enterprise value to 6.5x10E EBITDA.

Raju Shanbhag is a contributing editor for TMCnet.

Source:

http://internetcommunications.tmcnet.com/topics/broadband-mobile/articles/11883-telekom-austria-group-enters-belarusian-mobile-communications-market.htm

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