NEW YORK-France Telecom last week proceeded toward its goal of becoming a pan-European provider of seamless mobile, wireline and Internet communications through an agreement to acquire controlling interest in E-Plus, Germany’s third-largest wireless carrier.
After the E-Plus acquisition, France Telecom will have about 17 million subscribers on mobile networks in Belgium, Denmark, France, Germany, Italy, Moldova, the Netherlands, Poland, Portugal, Romania and Slovakia, according to Moody’s Investors Service Ltd., London.
France Telecom reached an agreement Oct. 18 with two German utilities, Veba AG and RWE AG, to buy their combined 60.25-percent stake in E-Plus for about $7.95 billion.
Two weeks earlier, the Paris-based carrier agreed to buy the 17.24-percent interest that Vodafone AirTouch plc held in E-Plus for $1.86 billion. The divestiture of its ownership in E-Plus was a condition of Vodafone’s acquisition of AirTouch Communications Inc.
“As with the Vodafone stake, this purchase will take place at the beginning of 2000, assuming BellSouth (Corp.), also an E-Plus stockholder with 22.51 percent, waives its preemptive right, and after obtaining approvals from the relevant regulatory and competition authorities,” France Telecom said.
“[We] intend to quickly reach an agreement with BellSouth and to eventually let new German shareholders enter the capital.”
The E-Plus purchase is France Telecom’s first entree into Germany, the most populous European country. The French company noted that wireless penetration in Germany was 23 percent at the end of August. By comparison, it said penetration rates average nearly 33 percent in other Western European countries, excluding Scandinavia, where the average is close to 50 percent.
“These figures indicate that the German mobile market has excellent growth potential,” France Telecom said.
“From this start in the mobile market, [we] plan to move into fixed telephony and Internet services to bring German consumers a full-service convergent offering, as [we] aim to do throughout Europe.”
E-Plus, headquartered in Dusseldorf, operates a nationwide Global System for Mobile communications 1800 network that has about 3.1 million subscribers, or a 16-percent market share.
Moody’s has placed France Telecom’s $13.4 billion in Aa1-rated outstanding debt under review for possible downgrade “to assess the financial and business risks associated with FT’s expansion in Europe,” said Eric de Bodard and Carlos Winzer, European corporate ratings analysts for Moody’s.
France Telecom said it would finance its acquisition of E-Plus by divesting non-core assets within the next two years, in particular its investments in Sprint Corp., of $9.35 billion-based on the merger offer from MCI WorldCom-and its 2-percent stake in Deutsche Telekom of $2.47 billion.
