MobilCom calls for cash
Winner of one of six German new generation mobile licences,
MobilCom looks set to close on the first UMTS project funding.
MobilCom's DM16.37 billion bid is being financed through a DM10 billion project loan lead arranged by ABN Amro, Deutsche Bank, Merrill Lynch, and SG. Six other banks have joined syndication ? BNP Paribas, Chase Manhattan, Dresdner Kleinwort Benson, ING, Sumitomo and WestLB.
MobilCom is also expected to ask equipment suppliers, including Ericsson, Nokia and Nortel to extend credit to assist the German company in developing telecommunications infrastructure. The company is striving for about 15% of the German market.
28% equity stakeholder France Telecom (with a further 40% option), which invested Eu3.74 billion in the company earlier this year, made no further investment as MobilCom sought capital for the German licences. France Telecom itself is finding handling UMTS debt profile tough, having been unable to join a bid with Enel for Infostrada.
In addition to the steep cost of its German licence, cost of developing MobilCom's UMTS network has been estimated at about DM25 billion. The 3G telco is thus looking to sell its 70% stake in German ISP Freenet.de to free up more cash.
The competition for German UMTS was intense, with awards made after 14 days of bidding and 173 rounds. The other license winners are British Telecommunications-backed Viag Interkom; E-Plus, a consortium of Japan's NTT DoCoMo Inc, the Netherlands' KPN Mobile and Hong Kong's Hutchison Whampoa Ltd.; Deutsche Telekom; and another bidding group, referred to as 3G, representing Spain's Telefonica SA and Finnish company Sonera Corp.
Aside from the surprise award of six licences instead of the expected five, the German auction was noteworthy for the high prices. The expense of acquiring a licence is mitigated at least in part by Germany's 82 million affluent inhabitants as well as low mobile phone penetration that is expected to grow rapidly.
Because Germany is Europe's largest mobile phone market, telecoms companies seeking to be a force in the European market were required to win one of the new generation licences. MobilCom's interest in a licence was not precipitated by ambition to become a major European telecoms player, as the company has a German focus.
MobilCom's ambitious plans call for its future UMTS operations to break even in 2005. ?Regarding other acquisitions in Germany, France Telecom and MobilCom will jointly consider all interesting opportunities for external growth. MobilCom is our strategic partner, so we plan to pursue projects in Germany together. There is no potential competition with MobilCom outside Germany, as they are a German company with a Germany-focused strategy. MobilCom is also not interested in pursuing any other licenses in other countries,? according to a Paris-based source at France Telecom.
MobilCom may already be on the acquisition trail. Rumours have the company courting smaller rival German telecoms company debitel. That company, with about five million subscribers in Germany, is said to be in serious discussions with five of the six winners in the recent German UMTS bidding contest.
Debitel is 74% owned by Swiss telecoms operator Swisscom, which has indicated a willingness to enter into a strategic alliance with a UMTS services provider.
Debitel dropped out early on in the bidding to acquire a German UMTS mobile phone licence. Swisscom recently announced a sweeping reorganisation that will divide the company into a series of independent operating units, with the mobile telecoms unit being given its own corporate structure. Making debitel an even more attractive acquisition target or joint venture partner is a jump of 48% in German revenues reported for the first six months of the year.
Even without developing an alliance with a larger competitor, by bailing out of the costly German bidding war, debitel may find itself in the enviable position of being able to purchase UMTS time at a low cost from one or more of the winners ? some of which may be anxious to generate revenue quickly to pay down the costs of acquiring a licence. While providing resellers with talk time on their networks will help licence-holders recover some of the hefty costs of acquiring those licences, those same resellers will provide low-cost competition.
Consequently mew ways of financing off-balance sheet are certain to appear in the UMTS market as the pace of auctioneering picks up worldwide.
Hutchison Whampoa is already rumoured to be in the market for a project deal on its UK UMTS licence, although none of the banks involved are willing to comment on the shape any future deal might take.
MobilCom's DM16.37 billion bid is being financed through a DM10 billion project loan lead arranged by ABN Amro, Deutsche Bank, Merrill Lynch, and SG. Six other banks have joined syndication ? BNP Paribas, Chase Manhattan, Dresdner Kleinwort Benson, ING, Sumitomo and WestLB.
MobilCom is also expected to ask equipment suppliers, including Ericsson, Nokia and Nortel to extend credit to assist the German company in developing telecommunications infrastructure. The company is striving for about 15% of the German market.
28% equity stakeholder France Telecom (with a further 40% option), which invested Eu3.74 billion in the company earlier this year, made no further investment as MobilCom sought capital for the German licences. France Telecom itself is finding handling UMTS debt profile tough, having been unable to join a bid with Enel for Infostrada.
In addition to the steep cost of its German licence, cost of developing MobilCom's UMTS network has been estimated at about DM25 billion. The 3G telco is thus looking to sell its 70% stake in German ISP Freenet.de to free up more cash.
The competition for German UMTS was intense, with awards made after 14 days of bidding and 173 rounds. The other license winners are British Telecommunications-backed Viag Interkom; E-Plus, a consortium of Japan's NTT DoCoMo Inc, the Netherlands' KPN Mobile and Hong Kong's Hutchison Whampoa Ltd.; Deutsche Telekom; and another bidding group, referred to as 3G, representing Spain's Telefonica SA and Finnish company Sonera Corp.
Aside from the surprise award of six licences instead of the expected five, the German auction was noteworthy for the high prices. The expense of acquiring a licence is mitigated at least in part by Germany's 82 million affluent inhabitants as well as low mobile phone penetration that is expected to grow rapidly.
Because Germany is Europe's largest mobile phone market, telecoms companies seeking to be a force in the European market were required to win one of the new generation licences. MobilCom's interest in a licence was not precipitated by ambition to become a major European telecoms player, as the company has a German focus.
MobilCom's ambitious plans call for its future UMTS operations to break even in 2005. ?Regarding other acquisitions in Germany, France Telecom and MobilCom will jointly consider all interesting opportunities for external growth. MobilCom is our strategic partner, so we plan to pursue projects in Germany together. There is no potential competition with MobilCom outside Germany, as they are a German company with a Germany-focused strategy. MobilCom is also not interested in pursuing any other licenses in other countries,? according to a Paris-based source at France Telecom.
MobilCom may already be on the acquisition trail. Rumours have the company courting smaller rival German telecoms company debitel. That company, with about five million subscribers in Germany, is said to be in serious discussions with five of the six winners in the recent German UMTS bidding contest.
Debitel is 74% owned by Swiss telecoms operator Swisscom, which has indicated a willingness to enter into a strategic alliance with a UMTS services provider.
Debitel dropped out early on in the bidding to acquire a German UMTS mobile phone licence. Swisscom recently announced a sweeping reorganisation that will divide the company into a series of independent operating units, with the mobile telecoms unit being given its own corporate structure. Making debitel an even more attractive acquisition target or joint venture partner is a jump of 48% in German revenues reported for the first six months of the year.
Even without developing an alliance with a larger competitor, by bailing out of the costly German bidding war, debitel may find itself in the enviable position of being able to purchase UMTS time at a low cost from one or more of the winners ? some of which may be anxious to generate revenue quickly to pay down the costs of acquiring a licence. While providing resellers with talk time on their networks will help licence-holders recover some of the hefty costs of acquiring those licences, those same resellers will provide low-cost competition.
Consequently mew ways of financing off-balance sheet are certain to appear in the UMTS market as the pace of auctioneering picks up worldwide.
Hutchison Whampoa is already rumoured to be in the market for a project deal on its UK UMTS licence, although none of the banks involved are willing to comment on the shape any future deal might take.
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