Private equity circling Orange Switzerland:sources
Private equity firms are likely to dominate the auction for France Telecom's
Analysts have said that the business, known as Orange Switzerland, could sell for around 1.5 billion euros. France Telecom has said it would return at least half of the proceeds to shareholders.
This is a business in a secure market that generates free cash flow. Any process is likely to involve sponsors rather than trade buyers, said a banker that advises European telecom firms.
France Telecom announced it was putting the unit up for sale on July 28 as part of a portfolio review aimed at improving profitability by pulling out of slow-growth mature markets where it is not among the top two players. The company, which still earns two-thirds of its profits in its home market, France, is instead seeking to expand in emerging markets in the Middle East and Africa.
France Telecom asset sales are part of a wider trend that has seen European telecom companies including Vodafone
The relatively small size of the Swiss market -- about 15 billion Swiss francs or 13.9 billion euros a year -- and its competitiveness make it a difficult place to generate profits.
The former state-owned monopoly Swisscom
Orange has managed only to eke out slight growth in its number of clients in the past four years to hit 1.6 million at end 2010, but revenues have declined over the same period.
It's not really an attractive target for a telecom operator because the market is so competitive, said a Paris-based telecom analyst.
It might be a good deal for a private equity group or even a cable operator that wanted to get into mobile.
Bankers said CVC and Sunrise were unlikely to participate in the auction because their bid could raise concerns with Swiss competition regulators. In late 2009, regulators rejected a proposed tie-up of Sunrise and Orange, saying consumers would likely be hit with higher prices if the market went from three to two players.
Sunrise was subsequently bought by CVC last year for $3.3 billion from TDC, the Danish telecom company that is controlled by private equity firms Apax, Blackstone, KKR and Permira.
Liberty Global's Cablecom unit, which offers a cable TV service as well as Internet and telephone services in Switzerland, has been cited as another potential candidate in media reports.
Another banker was sceptical about whether Cablecom would be interested in Orange because it lacks experience running a mobile network, and the Swiss market is so saturated.
A spokesman for Liberty declined to comment, saying only that its acquisition strategy was focused on consolidating cable markets.
A spokeswoman for France Telecom declined to comment.
(Editing by Will Waterman)
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