VC-backed MobilTel agrees €1.6bn sale

If the sale of the Bulgarian mobile-phone company to Telekom Austria goes through as agreed, its private equity backers stand to make a gain of €160m less than 18 months after the original investment.

Telekom Austria has acquired a call option to purchase 100 percent of MobilTel, Bulgaria’s largest mobile telephone operating company, in which a private equity consortium led by Citigroup Investments and ABN AMRO Capital acquired a 40 percent stake in May 2004.
If the deal, which has a total enterprise value of €1.6 billion ($2.1 billion), completes, the consortium would make a gain of €160 million on its €450 million investment.
MobilTel has almost three million subscribers, a 67 percent market share, and EBITDA of around €290 million, making it Bulgaria's largest mobile communications operator.
A consortium of seven firms led by Holland's ABN AMRO Capital and Citigroup Investments of the US acquired a 40 percent stake in the company in May 2004. The €1.2 billion deal, which included €750 million in debt financing, was the largest LBO yet completed in Central and Eastern Europe.

The other members of the consortium were: 3TS Venture Partners (a joint venture between 3i of the UK and Finland's Sitra); Communications Venture Partners (US); Innova Capital (Poland); Sandler Capital Management (US); and Global Finance (Greece).  
The call option, which is payable in the first quarter of next year and exercisable in the third, is priced at €80 million and is offset against the purchase price. Up to €150 million of the purchase price is dependent upon MobilTel achieving specific operating and financial performance targets, and will be payable in Q2 2006.
With managed revenues of €3.9 billion and employing 13,900 people, Vienna-based Telekom Austria is the country's largest telecommunications company, and has been listed on the Vienna and New York stock exchanges since November 2000. In a press release the company described the move as part of its strategy for expansion into South Eastern Europe, and indicated that it will fund the acquisition through cash flow and the issuance of debt.