Hutchison seals deal to buy Orange Austria

Hutchison Whampoa, which owns 3, the European telecoms mobile operator, on Friday finalised a €1.3bn deal to buy Orange Austria from France Telecom and Mid Europa Partners, the private equity group.

France Telecom owns 35 per cent of Orange Austria, with the remainder controlled by Mid Europa Partners. The deal has an implied enterprise value of about €1.3bn, although the group carries about €1bn of debt, which will mean that the partners are expected to take a share of cash worth €300m.

Hutchison Whampoa is expected to seek a merger with its mobile operator 3 Austria that would combine the third- and fourth-largest Austrian operators. The deal is the latest sign of the pressure on operators to consolidate within their markets owing to pressure on revenues at the same time as increased need for investments in network infrastructure. National regulators have generally stood in the way of fewer than three operators in any one market due to the threat to competition.

In a statement, Hutchison said it expected to generate cost and capex synergies of at least €500m from combining Orange Austria with its subsidiary 3 Austria. “With pro-forma 2.8m customers, a market share of 22 per cent and combined (estimated) revenues of more than €700m in 2011, this transaction creates a strong and competitive top three player in the Austrian market,” the company said.

The sale by France Telecom is the latest in its strategy to divest smaller and non-core businesses in markets that are no longer showing signs of significant growth, and instead focusing on either its core market or higher growth markets in Africa and the Middle East. Hutchison was advised by JPMorgan and France Telecom and Mid Europa Partners by Morgan Stanley.

The company last month agreed to sell its Swiss business, Orange Switzerland, to Apax Partners, the private equity group, and has also indicated it is interested in disposing of its Portuguese holdings.