August 21, 2012 / 5:21 PM / 5 years ago

INTERVIEW-Telekom Austria looks to Slim for expansion

* Company exploring structures for co-investment with Slim

* No plans to expand into new countries

* Shares down 3.8 pct

By Paul Sandle and Georgina Prodhan

LONDON/VIENNA, Aug 21 (Reuters) - Telekom Austria (TELA.VI) is betting on its new high-profile investor Carlos Slim to fund acquisitions in central and eastern Europe that could drive growth as sales decline in its saturated and hyper-competitive home market.

Chief Financial Officer Hans Tschuden said Telekom Austria, which issued a profit warning last week, was exploring ways to structure future investments with Slim’s America Movil (AMXL.MX) (AMX.N), which has agreed to buy 26 percent of Telekom Austria.

“In cases where there are potential projects that we couldn’t finance by ourselves we will see which structures could be helpful,” Tschuden said when asked about Austrian media reports that the two operators were planning a holding company for investments in the region.

“(If) we could not finance these transactions by our own means, it could be realised with a partner,” he told Reuters in an interview in London.

Telekom Austria wants to increase its fixed-line operations in countries where it has a mobile presence, hoping to replicate its success in moving customers in Austria onto more lucrative packages that bundle landline, Internet, mobile and TV services.

About 1 million of its 2.3 million Austrian customers take more than one service, but momentum for switching is slowing. Tschuden estimated there was scope to move about 30 percent of the remaining 1.3 million to bundled offers.

“There are no plans to expand our geographical portfolio,” Tschuden said. “We have done three acquisitions last year - two in Bulgaria and one in Croatia - to add fixed line operations to our mobile operation, and this is the way we are going forward.”

Telekom Austria still lacks fixed-line services in Belarus, Slovenia, Serbia, Macedonia and Liechtenstein.

Mexican tycoon Slim has looked at buying telecoms operations in Serbia and Poland in the last two years.

Shares in Telekom Austria continued a downward trajectory on Tuesday, closing down 3.8 percent at an 11-year low of 6.45 euros in a flat wider telecoms market .SXKP.

In its home market, Telekom Austria is pinning its hopes on European regulators approving a proposed merger between the two smallest Austrian operators: Orange FTE.PA and Hutchison 0013.HK 3G. [ID:nL6E8JFB1T]

“There’s an industrial logic for that simply by the fact that a small country like Austria with 8 million people does not require four operators with full networks,” Tschuden said.

As part of the deal, Telekom Austria has agreed to buy Orange’s budget brand Yesss! for 390 million euros ($481 million), with Hutchison taking over the rest of Orange’s Austrian operations.

Tschuden said the deal stood on its own financial merits, but it was also a price worth paying for market consolidation.

“(Yess!) is an area that is complementary to our existing operations, and it helps to realise the total transaction for Hutchison,” he said.

“I think it a reasonable price because the multiple in terms of cash flow is in line with market multiples.”

($1 = 0.8103 euros)

(Editing by David Cowell)

((paul.sandle@thomsonreuters.com)(+44 20 7542 6843)(Reuters Messaging: paul.sandle.thomsonreuters.com@reuters.net)) Keywords: TELEKOMAUSTRIA SLIM/ACQUISITIONS

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