Deutsche snaps up One2One in pounds 8.4bn deal
Saturday 07 August 1999
The sale will net pounds 3.4bn for Cable & Wireless, the 50 per cent owner of One2One, raising the possibility of a windfall payout to its shareholders later this year.
Deutsche Telekom, which was defeated earlier this year in the bid battle for Telecom Italia, is paying Cable & Wireless and MediaOne of the US, the other joint owner, pounds 6.9bn in cash for One2One and assuming pounds 1.5bn of third-party debt.
The German telecoms giant was last week given exclusive rights to negotiate a deal after the only other remaining bidder, its rival German mobile operator Mannesman, dropped out of the running.
The purchase price represents a 30 per cent discount to the value of Orange, the UK's third-biggest mobile operator, and compares with initial valuations of One2One of up to pounds 11bn. But Graham Wallace, the chief executive of Cable & Wireless, maintained it was a very good deal and represented a 40 per cent premium to the average price of European mobile operators.
One2One has 2.65 million subscribers - all but 350,000 of them residential - and made an operating loss of pounds 52m on sales of pounds 781m in the year to 31 March. Four in 10 of its customers are on pre-pay mobile phone contracts.
Under Deutsche Telekom's ownership, the strategy will be to move more aggressively into the business market. A spokesman for the German telecoms giant said that One2One's large amount of spare capacity during the daytime hours could be exploited to carry more business and data traffic without interfering with voice traffic.
The One2One management, led by the managing director Tim Samples, will stay on. Although Mr Samples would have preferred a flotation of the business, One2One said a single committed owner would end the uncertainty and help the business to grow.
Together with the pounds 3.5bn raised from the sale of Cable & Wireless' residential cable interests to NTL, Cable & Wireless is likely to have net cash at the end of this financial year.
This will help it to fund its capital expenditure programme, which this year alone will reach pounds 3bn. However, Mr Wallace said that a capital distribution to shareholders would be one of the options C&W looks at. "It is nice to have to have a strong balance sheet but you can also end up with an inefficient capital structure," he added.
Outlook, page 19
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