Telenor ASA, Norway's largest phone company (owner of Hungary's Pannon), won the auction for Serbian mobile-phone operator Mobi 63 for €1.51 billion ($1.9 billion) in the Balkan country's biggest state-owned asset sale. The Nordic company, which beat Telekom Austria AG and Egypt's Orascom Telecom Holding SAE in an auction in Belgrade yesterday, will gain more than 2 million wireless customers in a country where about seven out of 10 people have a handset. Telenor, based in Fornebu, has expanded through acquisitions in nations such as Hungary and Ukraine as demand for traditional phone services shrinks at home. The strategy has helped Telenor grow faster than Swedish competitor TeliaSonera AB. The purchase price compares with the minimum of €800 million required by the government when bidders were invited to the contest. „With the 65% penetration there is still room for subscriber-driven growth in the Serbian market,” said Bjoern Thoresen, an analyst at First Securities in Oslo with an „accumulate” rating on Telenor's stock. „The price seems to be toward the high end of the fair valuation range.” Shares of Telenor fell 1% to 78.5 Norwegian kroner in Oslo, valuing the company at 134 billion kroner ($21.8 billion). Orascom dropped 0.7% to 275 Egyptian pounds in Cairo. Telekom Austria rose 1.7% to €17.69 in Vienna.
As almost everyone in Western Europe owns a mobile phone, companies including Telenor are increasing investments in eastern Europe and other emerging markets to benefit from faster growth. Germany, a nation of 82 million people and Europe's largest wireless market, had 81 million mobile-phone subscriptions at the end of March. Earlier this month, Telenor was among companies that lost out to Emirates Telecommunications Corp. for Egypt's third mobile-phone license. Emirates, the second-largest Arab telecommunications company by market value, won the permit with its $2.9 billion offer. Serbia's government owns 70% of Belgrade-based Mobi 63. The remaining 30% stake is held by a group of Austrian investors, who have agreed to sell the holdings if the winning bid exceeds €1.1 billion. Mobi 63, founded as Mobtel in 1994, competes with Serbia's fixed-line monopoly Telekom Srbija, which also sells wireless services. Mobi 63 had sales of about €233 million in 2005, and earnings before interest and tax of €96 million, according to Telenor.
„This is a very attractive operation for us,” said Jan Edvard Thygesen, head of Telenor's central and eastern European operations, on a conference call. „We will work hard” to achieve „synergies” with Telenor's units in nearby regions such as Montenegro. Telenor aims to increase Mobi 63's market share to more than 50% by 2010, from about 45%, the company said. Profit margin, measured by earnings before interest, tax, depreciation and amortization as a percentage of sales, will probably fall to 45% in 2010 from 54% last year as Telenor plans higher spending on marketing. The so-called mobile penetration rate in Serbia is 65%, Telenor said.
Sale proceeds from Mobi 63 of about $1.5 billion for the government, or 4.5% of Serbia's gross domestic product, will assure the state's financing requirements „for the next few years,” Bear Stearns & Co. analyst Timothy Ash wrote in a note, calling the sale a „personal triumph” for Finance Minister Mladjan Dinkic. „The sale of Mobi 63 is a huge success for Serbia,” Dinkic, 41, said at a press conference. All money will go to the National Investment Plan, a set of projects aimed at improving infrastructure such as roads, railway networks, border crossings and a small commercial airport, Dinkic said. With the sale today, foreign investments in Serbia will exceed $2.5 billion this year, he said. Serbia, which will become a separate state after Montenegro voters endorsed independence on May 21, had economic growth of 7.8% in the past two years, and is targeting 7% growth in the medium term.Telekom Austria, the largest phone company in Austria and owner of wireless assets in Croatia and Slovenia, has sought to expand into Serbia for more than three years. The company made a „good and reasonable” decision to pull out of the auction today, Chief Executive Officer Boris Nemsic said in an interview. Telekom Austria will now focus on expansion in Slovakia and Bosnia, and still plans to enter Serbia by bidding for the country's third mobile-phone permit, he said. Cairo-based Orascom is the Middle East's largest mobile-phone company by subscribers. Companies that were qualified to bid and eventually didn't make an offer include Deutsche Telekom AG, France Telecom SA, Tele2 AB, TeliaSonera, Emirates Telecommunications Corp. and OAO Mobile Telesystems. Rothschild Group and Citadel Financial Advisory advised the Serbian government on the sale. (Bloomberg)