América Móvil finally reached an accord with the Austrian state to increase its control over Telekom Austria. While the general reaction is that the Carlos Slim-owned group plans to use the Austrian incumbent as a starting point for his European growth ambitions, doubts remain over the future strategy.
Following the agreement between América Móvil and ÖIAG to pool their respective stakes in the operator, América Móvil said it would launch a public offer of €7.15 per share for all outstanding Telekom Austria shares not held by América Móvil, its subsidiary Carso Telecom, ÖIAG, or Telekom Austria. The offer is to be carried out in the next few weeks, although América Móvil has not set a target stake.
Once that offer has been closed, and subject to approval by the Telekom Austria shareholders' meeting, América Móvil and ÖIAG plan to vote in favour of and support a capital increase in Telekom Austria of €1 billion ($1.38 billion).
As things stand, Telekom Austria has made little comment other than to note it has been informed of América Móvil's move. For Carlos Slim, the agreement represents something of a victory following his previous failed attempt to gain majority control of KPN, and his move into Europe is regarded as logical given the growing regulatory and competitive pressures in Latin America.
Nonetheless, América Móvil's strategy for Telekom Austria is still somewhat hazy: for one thing, Telekom Austria is a pretty small company in a small market. According to Reuters, América Móvil's market capitalisation of $45.4 billion dwarfs Telekom Austria's $4.1 billion.
"Diversifying into tiny Telekom Austria is probably a good financial investment but hardly enough to offset the more general malaise," Bernstein telecoms analysts wrote in a note, Reuters reported.
Telekom Austria does have plenty of assets elsewhere, which was part of the attraction for the Mexican group: it owns a mix of fixed and mobile operations in Belarus, Bulgaria, Croatia, Serbia, Macedonia, Liechtenstein and Slovenia. As of December 31, 2013, it had about 2.6 million fixed-line subscribers, 20.1 million wireless subscribers and revenues of €4.1 billion.
"The main goal for both parties was the further development and future of Telekom Austria," said América Móvil CEO Daniel Hajj.
Hajj added that Telekom Austria is now in a position to benefit from growth opportunities in the region, hinting at ambitions to look elsewhere for acquisition targets.
However, many industry experts still harbour doubts about the Mexican group's strategy and there are concerns that Telekom Austria's value could be increased or diminished depending on the strategy.
"It's still not 100 percent clear what their intentions in Europe are," Ken Berlin, senior research analyst at Legal & General Investment Management America in Chicago, told Reuters.
Indeed the talks between ÖIAG and América Móvil, which even Hajj described as "intense", and the meeting of the ÖIAG supervisory board were clearly very contentious. Austrian unions are still very much opposed to the deal.
For more:
- see this statement by América Móvil
- see this Reuters article
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