Trio acquire Elektrim cable assets

Hicks Muse, Argus and Emerging Market Partnership have acquired the cable TV assets of Elektrim Telekomunikacja, with plans to consolidate the region’s television operations.

A consortium comprising three international equity sponsors has completed the purchase of the cable activities of Elektrim Telekomunikacja (ET), the Polish telecommunications company owned by Polish conglomerate Elektrim and Vivendi Universal.


The consortium included US private equity house Hicks Muse Tate & Furst, Argus Capital Partners, a division of Prudential-owned PRICOA Capital Group, and Emerging Markets Partnership (EMP). The group has agreed to pay E110m for the business, which includes Aster City Cable, which has a total of 355,000 subscribers including 280,000 in the Polish capital Warsaw.


A total of five bidding consortia were involved in the auction process, commenced last year, which was reduced to a final group of three. The final three were Advent International, currently in exclusive talks with the Bulgarian government over the sale of Bulgarian state telelcom business BTC, a group comprising Enterprise Investors, AIG and Innova Capital, and the Hicks Muse, Argus, EMP consortium.


Reports earlier this year had suggested that Citigroup, along with a number of financial investors, including Dutch retailer Eastbridge Group and Poland's BRE Bank, were planning to pay E600m for Vivendi Universal’s entire holding in Elektrim Telekomunikacja as the French conglomerate sought to reduce its debt burden.  The cable assets sale comprises only a small part of the entire Elektrim Telekomunikacja group, but a source close to the deal said that the price was in keeping with a sizeable discount to the E1.8bn Vivendi paid for a 51 per cent stake in the business in 2000.


Elektrim has had its share of financial troubles in 2002 and filed for bankruptcy after being unable to meet the repayments for $480m of convertible debt in September.


Ali Artunkal, managing director at Argus Capital, said the firm first became aware of the deal 16 months ago. “We first contacted Hicks Muse in the middle of last year to discuss a possible bid for ET’s cable assets. Hicks Muse was the right partner because of its experience of the auction process and its knowledge of the cable TV sector.”


The acquisition is likely to be the first step in a broader consolidation of the Central and Eastern Europan telecoms market. Argus Capital already controls a cable television company in Hungary which it established by merging a number of regional players. Hicks Muse is currently preparing to take an equal share in Argus Capital’s Hungarian assets, which could in turn be merged with assets controlled by Emerging Markets Partnerships.  


“We could potentially see a situation in which we would merge our Hungarian assets with those of Elektrim Telekomunikacja as well as EMP’s cable TV assets in the Czech Republic,” said Artunkal. Hicks Muse partner Lyndon Lea said the acquisition of Aster City Cable gave the consortium “a very strategic platform from which to execute a pan-regional consolidation of the cable TV industry in Central Europe.”


The Eastern European telecommunications M&A market has been an active, if tempestuous, market in 2002. Many of the region’s deals have been delayed, including the sale of Cesky Telecom to a consortium led by Deutsche Bank and Advent International’s acquisition of Bulgarian Telecom assets, both of which have been protracted by political intervention and lengthy negotiations over price.


The Elektrim transaction is likely to complete in the first quarter of 2003.