Telekom Austria buys Belarus MDC for $1 billion
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20:35, — Economics
VIENNA (Reuters) - Telekom Austria has agreed to buy Belarus's second-biggest mobile phone operator MDC, continuing its drive to tap rapid growth in emerging European phone markets, the company said on Wednesday. Telekom Austria will initially buy a 70 percent stake in MDC's parent, Cypriot company SB Telecom, for around $1 billion in equity and debt, and has an option to buy the remainder of SB Telecom for $450 million in 2010, it said.
The deal, which Telekom Austria flagged two weeks ago, values MDC at six times next year's core earnings, which analysts said was cheap relative to similar deals, helping Telekom Austria shares rise as much as 3.5 percent.
"The acquisition of MDC ... 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," Chief Executive Boris Nemsic said in a statement.
MDC, operating under the Velcom and Privet brands in Belarus, had 2.5 million subscribers and a market share of 42.5 percent last year. Its earnings before interest, tax, depreciation and amortization (EBITDA) were 159 million euros ($225 million), giving it an EBITDA margin of 60 percent.
The deal values MDC at 5.9 times next year's estimated EBITDA, Telekom Austria said. It may top this up with an additional payment in 2010 linked to MDC's performance, which would bring the entire price paid to 6.5 times EBITDA in 2010.
"Six times EBITDA is quite an attractive condition," said Konstantin Belov, telecom analyst at Uralsib bank in Moscow. "It does not look very expensive, especially if you look at current valuations of Russian telcos."
Russia's MTS and Vimpelcom are both valued at around seven times next year's EBITDA, while the Russian market is already more saturated than Belarus, he said.
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