France Telecom pays $523 million to acquire extra 23.36% in Orange

Through its mobile telephone division Orange, France Telecom has acquired a further 23.36% in Orange Romania from a consortium led by AIG New Europe Fund. It paid 523 million dollars (408.5 million euros) in cash for the new shares.

The deal allows the operator”s market value to be evaluated at 2.273bn dollars (1.776bn euros) or around 450 dollars (351.5 euros) per subscriber. Market sources, however, say the price paid by France Telecom for the new stake was low, having bought it from another minority shareholder, meaning that Orange Romania”s market value is actually higher.

The deal was closed at a value 4.8 times that of the EBITDA (earnings before interest, tax, depreciation and amortisation) announced by Orange for the stake last year. “This is a reasonable multiplying factor, considering this was a minority stake, which comes with fewer rights,” Doina Popescu, AIG CET Capital Management”s manager for Romania, told Ziarul Financiar.

Orange Romania officials declined to comment on the deal for the time being. France Telecom”s interest in Orange Romania currently amounts to 96.63%, up from the previous level of 73.27%. The remaining shares are held by MBL Computers and Radcom, controlled by businessman Nicolae Badea. He did not care to comment on the transaction.

The investor consortium led by AIG New Europe Fund also included Polish Enterprise Fund, Innova/98, Communications Venture Partners, BancBoston (now part of Bank of America), Societe Generale Romania Fund and Alcatel. The transaction was brokered by Ph. Villin Conseil and Edmond Rotschild Corporate Finance.

The consortium, in which AIG New Europe Fund was the main member, has quadrupled its investment since 2000, when it first bought into the company. The gain is the equivalent of an annual yield of 30%. The sale of the Orange stake represents the last transaction AIG New Europe Fund will make in Romania, with the fund scheduled to return the money it has been managing to its investors.

Through this transaction France Telecom is continuing its policy of buying all the shares in its divisions that stood out for their good results, such as constantly increasing customer base, revenues and profits: it acquired the whole of its mobile telephony division Orange in 2003, before moving on to its Internet division Wanadoo and service division Equant. On the other hand, it has left alone those markets where its divisions failed to achieve a top-three position or had less than 20% of the market, as in the case of Orange Denmark.

Orange Romania collected 772 million dollars (622.5 million euros) in revenues last year, up by more than 46% on 2003. At the same time, its EBITDA was estimated at 400 million dollars (322.5 million euros). Last year also saw the company sign up nearly 1.6 million news customers, overshooting the 5 million-customer milestone by January 2005. France Telecom will release their first quarter results on April 28, according to the official schedule.

The operator is aiming to win at least one million new customers this year, to which end it plans to invest at least 200 million dollars (155 million euros) in developing its network and expanding the services it provides, after investing 180 million dollars (150 million euros) in 2004. dan.dragomir@zf.ro ; vlad.nicolaescu@zf.ro