France Tele­com gets pri­vate-eq­uity in­ter­est

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France Tele­com SA (FTE) has re­ceived in­ter­est from pri­vate-eq­uity firms seek­ing a mi­nor­ity stake in its 50-50 U.K. ven­ture with Deutsche Telekom AG (DTE), Chief Ex­ec­u­tive Of­fi­cer Stephane Richard said.

The largest French phone com­pany hasn’t made a de­ci­sion on the fu­ture of the busi­ness, re­cently re­named EE, and could in­stead go for an ini­tial pub­lic of­fer­ing of its shares, Richard said yes­ter­day in an in­ter­view at an in­dus­try con­fer­ence in Mont­pel­lier, France.

“We want to keep con­trol of the as­set, and so do the Ger­mans,” Richard said. “That said, there is a pos­si­bil­ity that we can give our­selves some fi­nan­cial head­room by open­ing EE’s cap­i­tal to a mi­nor­ity share­holder or through an IPO, but we haven’t yet de­cided.”

France Tele­com jumped as much as 2.4 per­cent from its in­tra­day level yes­ter­day af­ter Richard’s com­ments. A stake sale in the unit would help France Tele­com bol­ster its fi­nances as in­ten­si­fy­ing ri­valry at home and Europe’s slow­ing econ­omy hurt earn­ings. Its debt rat­ing was low­ered for the first time in a decade last month and the car­rier cut its div­i­dend to keep bor­row­ings un­der con­trol.

EE may be val­ued at 7 bil­lion pounds ($11.1 bil­lion) to 7.7 bil­lion pounds, based on a mul­ti­ple of 5 to 5.5 times its earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­za­tion, ac­cord­ing to Stephane Beyazian, an an­a­lyst at Ray­mond James Euro Eq­ui­ties.

France Tele­com, based in Paris, de­clined 1.6 per­cent to 8.09 eu­ros at 10:31 a.m. Paris time. Deutsche Telekom fell 1.1 per­cent to 8.26 eu­ros on the Frankfurt ex­change.

The CEO said “many” pri­vate-eq­uity funds have ex­pressed in­ter­est in buy­ing part of the as­set, with­out dis­clos­ing names. France Tele­com and Deutsche Telekom cre­ated Ev­ery­thing Ev­ery­where in 2010 to save more than 4 bil- lion eu­ros in net­work, mar­ket­ing and ad­min­is­tra­tive costs by 2014. That deal cut the num­ber of U.K. net­work op­er­a­tors to four from five.

An IPO would be pos­si­ble in two years, France Tele­com Chief Fi­nan­cial Of­fi­cer Ger­vais Pel­lissier said in a sep­a­rate in­ter­view yes­ter­day in Barcelona at a con­fer­ence or­ga­nized by Mor­gan Stan­ley.

“There are no plans to­day, it’s for the fu­ture,” Pel­lissier said. “We are not like Tele­fon­ica that needed to do the O2 IPO be­cause it needed cash. O2 Ger­many had proved al­ready a track record for sev­eral years, which is not the case yet at EE. We don’t need cash right now, we need to prove that this is a nice as­set.”

Tele­fon­ica Deutsch­land Hold­ing AG, the Ger­man unit of Spain’s largest phone com­pany that sells ser­vice un­der the O2 brand, started trad­ing last month af­ter com­plet­ing Europe’s big­gest ini­tial pub­lic of­fer­ing this year.

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