America Movil is having another go at taking control of a European operator and establishing a firm beach head in the region. Having been rebuffed at KPN in The Netherlands, it is bidding up to $1.96bn to buy out minority stakeholders in Telekom Austria, in which it currently owns a 26.8% share.
The Mexican giant has signed a 10-year agreement with the state holding company OeIAG. This combines the OIAG’s 28% of Telekom Austria with its partner’s 26.8% in a syndicate holding structure and America Movil will fund the buyout of other investors via a rights issue, after which the OIAG will reduce its stake to 25% plus one golden share and the right to name the carrrier’s chairman and CEO.
As a controlling shareholder group, America Movil and OeIAG have to offer to buy the shares of minority shareholders under Austrian law. Movil will offer €7.15 ($9.88) a share for the rest of the company, a 7.5% premium over the previous day’s closing price of €6.65 and above the legal minimum. It will also vote for, and invest in, a €1bn capital increase by Telekom Austria to invest in the eight countries where it currently operates, and perhaps to expand in others in the central and eastern Europe region, which has higher growth left than the western portion, and which is also the key expansion target for Germany’s Deutsche Telekom.
‘This agreement provides the basis for future growth, continued innovation, and solid investment in Telekom Austria,’ America Movil Chief Executive Officer Daniel Hajj said yesterday in a statement. ‘It will also contribute to better position Telekom Austria as a more relevant player in the European telecommunication markets and to be in a position to benefit from growth opportunities in the region.’
Some analysts are concerned that America Movil will be venturing too far out of its comfort zone if it seeks a maor position in Europe, where telcos are very well established. Julio Zetina, an analyst at Vector Casa de Bolsa, told Bloomberg that Europe has ‘very developed markets, particularly in telecoms, with completely different drivers than Latin America’s, not to mention affordability levels. America Movil’s strengths are not as evident there.’ However, others think expansion is essential as the firm faces regulatory restrictions and increased competition on its Mexican home base.
The giant’s previous attempt to build a majority holding in Europe was thwarted when directors of Dutch telco KPN rebuffed Movil’s takeover bid. Since then, the Mexican firm has lowered its KPN stake twice, most recently to 24.83% from 27.1% earlier this year.