France Telecom has entered into a binding agreement with its partner Mid Europa Partners (MEP) for the sale of their combined 100% stake of Orange Austria to Hutchison 3G Austria, a subsidiary of Hutchinson Whampoa Limitied, for approximately $1.7 billion.
France Telecom (Paris) currently holds a 35% stake in Orange Austria, while MEP (London) holds the remaining 65% stake. As part of the overall transaction, Hutchison (Hong Kong) will sell frequencies, base station sites, the mobile phone operator Yesss! Telekommunikation GmbH as well as certain intellectual property rights to Telekom Austria Group, immediately after the acquisition.
The agreement is expected to provide France Telecom with cash proceeds of around $92 million for its equity stake. Orange Austria had an estimated 2011 revenue of approximately $658 million and a total customer base of 2.3 million at the end of 2011. The company employs almost 800 people.
Hutchison, controlled by Hong Kong billionaire Li Ka-shing, has been shopping for regulated infrastructure and utility assets in developed countries, especially Britain, which is open to foreign ownership of its infrastructure assets.
"It is a good opportunity for those financially strong companies to buy assets in Europe, especially if they believe in the strong growth prospect," says Conita Hung, head of equity research at Delta Asia Financial Group.
This deal by the unit of Hutchison Whampoa follows a cluster of outbound M&A transactions from Asia in early 2012 as firms with large cash piles and low debt buy assets in Europe, where economies are struggling with the debt crisis.
So far in 2012, Asian corporates have launched about $9.3 billion worth of outbound deals, compared with $181 billion worth transactions attempted the whole of last year, according to Reuters.
High-profile deals this year include Shandong Heavy Industry Group's purchase of a 75% stake in debt-laden Italian yacht-maker Ferretti Group and China Investment Corp's purchase of an 8.7% stake in the holding company of Thames Water, the privately-held UK utility.
Hutchison said this deal would make it Austria's third-biggest mobile phone operator, with 2.8 million customers and a 22% market share. The two units had combined revenues of more than $918 million in 2011.
In Vienna, Hutchinson 3G Austria chief Jan Trinow told reporters the combined entity aimed to control a third of the market in the medium term and could generate $655 million in synergies over time. He said he hoped for anti-trust approval by mid-year and said the Orange brand would be phased out eventually.
As a second leg of the deal, Hutchison will sell some of Orange Austria's assets to Telekom Austria for $510 million, Telekom said separately.
The assets comprise frequencies, base station sites, mobile phone operator YESSS! Telekommunikation GmbH and certain intellectual property rights, the statement added.
For France Telecom, the sale is the second deal in an ongoing portfolio review aimed at exiting low-growth mature markets and returning cash to shareholders. It recently agreed to sell Orange Switzerland to private equity group Apax Partners for about $2.1 billion.