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Teliasonera to start Yoigo sale soon -sources
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By Leila Abboud and Sophie Sassard
Tue Sep 25, 2012 11:59am EDT
PARIS/LONDON (Reuters) - Teliasonera will kick off the sale process for its Spanish mobile operator, Yoigo, in the next two weeks in a deal that is expected to attract bids from France Telecom and Vodafone, three people familiar with the matter said.
Information documents are set to go out soon to bidders, the people told Reuters, after being delayed over the summer by holidays and the departure of Yoigo's chief executive.
The Nordic telecoms group has hired Deutsche Bank to manage the disposal of its 76.6 percent stake in Yoigo, which it hopes can fetch roughly 1 billion euros ($1.29 billion), as it exits non-core markets in favor of its Scandinavian heartland and higher-growth central Asia.
Yoigo is the smallest of Spain's four mobile operators with roughly 5.6 percent of the market and 3.3 million customers. After launching six years ago, it struggled to post a profit until last year and has had positive free cash flow since the last quarter of 2011.
The deal would make sense for Vodafone and France Telecom, the second- and third-largest players in the Spanish market respectively, because it would allow them to achieve better pricing power and make savings.
Both Vodafone and France Telecom see Spain as an important country. It is Vodafone's fourth-largest market in terms of revenue and France Telecom's second-biggest.
Teliasonera and France Telecom declined to comment. Vodafone could not immediately be reached for comment.
It is less likely that a newcomer to Spain would bid for Yoigo, the people said, downplaying media reports that Carlos Slim's America Movil would continue its European expansion by entering Spain.
In July, America Movil said it was not currently interested in Yoigo.
The bidders' appetite will depend on the price demanded by Teliasonera. Sector bankers put markedly different valuations on the business with some saying it is worth 600 million euros and others arguing for more than 1 billion euros once the value of tax credits and cost savings are factored in.
For example, Yoigo has a roaming contract with market leader Telefonica to carry its traffic in places where it does not have its own network, which costs some 100 million euros a year, one source said.
If Vodafone or France Telecom were to buy Yoigo, it could save that money by carrying the traffic itself. But two other sector bankers said breaking the contract could not be assured.
One of the bankers added that Yoigo remained "sub-scale" with little cash flow.
"The process looks difficult because only Vodafone and France Telecom are likely to be there," the banker said. "It's very difficult to tell your board you're going to invest in Spain right now."
Spain's mobile market has been hit hard by the country's recession as consumers cut spending amid record unemployment.
Telefonica and Vodafone have been losing clients in recent quarters to France Telecom's Orange brand and Yoigo.
France Telecom Chief Executive Stephane Richard told Reuters in late August that the group would look at Yoigo if and when it came up for sale.
"We would be interested... but the Spanish economy remains in a difficult phase, so financing a big acquisition there would be a big bet," Richard said. "But from a strategic and industrial point of view, if there is an opportunity to consolidate the Spanish market, we would look at it."
Spanish construction groups ACS and FCC hold 17 percent and 3.4 percent of Yoigo respectively, while technology group Telvent holds the remaining 3 percent.
(Additional reporting by Arno Schuetze in Frankfurt, Sarah Morris and Robert Hetz in Madrid; Editing by James Regan)
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