Buyers put pressure on price for DT cable assets

Revised offers from consortia including a group made up of Apax, Providence and Goldman Sachs is likely to value Deutsche Telekom’s cable assets at less than E2bn.

Three private equity groups keen on acquiring Deutsche Telekom’s German cable television assets are expected to submit offers below the E2bn valuation placed on the business by its parent.


Last year, a bid from Liberty Media for DT's six regional cable operators was rejected by the German cartel office on account of its reluctance to guarantee universal access to telephony as part of its offer. Liberty’s bid was worth E5.5bn.


Leading the bidding this time around is a consortium comprising Apax Partners, Providence Equity Partners and Goldman Sachs Private Equity, which is expected to submit an offer of between E1.6bn and E1.9bn, according to today’s Financial Times.


Also in the running are CVC Capital Partners and Warburg Pincus and, separately, Hicks, Muse, Tate & Furst. However, the Apax consortium is expected to enter into exclusivity with Deutsche before the end of January, according to the newspaper.


Deutsche Telekom is likely to accept a reduced offer for its cable assets due to the company’s high level of indebtedness. At the end of September 2002, company debt stood at E64bn. DT plans to reduce debt to around three times EBITDA for the coming year, estimated at E16.7bn to E17.7bn. The company is expected to try and recoup around E10bn from disposals this year.


DT’s disposal program is underway and had anticipated proceeds of between E2bn and E2.3bn from the sale of the cable TV business. DT is hoping to boost the price for the company’s cable TV assets up to E2.1bn by tying in performance targets over the next two to three years for the business which has cashflows of E300m.


Deutsche Telekom has concluded sales in the past few weeks which have contributed a total over E1.2bn to reducing the debt level. Included in this was the sale of a 10.9 per cent stake in European satellite agency Eutelsat to a consortium led by Investindustrial, the Italian private equity house formerly known as 21 Invest, for E210m.


Shares in Deutsche Telekom have fallen to just under E14 from a high of E103.50 in March 2000.