Orange says no plans to buy E-Plus

May 28, 2001
Web Posted at 1208 GMT

PARIS, May 28 (Reuters) - European cellphone giant Orange on Monday denied a report it was in talks to buy German mobile operator E-Plus, owned by Dutch KPN Telecom and U.S. carrier BellSouth.

Analysts were sceptical about the chances of a deal because it would leave Orange with two UMTS mobile licences in Germany, but shares in Orange slipped as some investors reacted warily to mere talk of a big takeover by the loss-making group.

“There is no intention on the part of Orange to buy E-Plus,” a spokeswoman at France Telecom, Orange's parent, said.

She was commenting on a report in Britain's Sunday Telegraph newspaper that Orange was studying an $8.5 billion acquisition of E-Plus, Germany's number three mobile operator with some seven million subscribers and a 14 percent market share.

E-Plus declined to comment on what it dubbed speculation.

Mobilcom, France Telecom's 28.5 percent-owned German subsidiary also said it would not comment on market talk, and added that it did not envisage further cooperation with E-Plus aside from a national roaming agreement signed in April.

Shares in Orange, floated at 10 euros in February, were down 1.52 percent at 1105 euros at 1002 GMT, earlier touching 10.95 as investors, worried there may still be a bid, played safe.

“They might have denied it but some people are still worried there could be a bid and $8 billion would be a lot to swallow for a company that is still loss-making,” said a Paris trader.

The world's number four cellphone group with 30.5 million subscribers, Orange held takeover talks with E-Plus when it was still British, before being snapped up by Germany's Mannesmann.

France Telecom, which bought Orange in 2000 following Vodafone's takeover of Mannesmann, also talked to E-Plus in 1999 but had its interests thwarted by KPN and BellSouth.

“At this time (end-1999) the global valuation of E-Plus was 17.8 billion euros with four million fewer subscribers than today,” said analyst Manuel Lachaux at brokerage ETC. “This deal could be interesting (now) but would raise the question of (France Telecom's) interest in keeping a stake in Mobilcom.

If the deal is seen posing more problems for Orange than benefits in terms of increasing market share, analysts are also doubtful of the motivation for KPN, given the Dutch group is under pressure to attract a partner for its KPN Mobile unit.

“KPN would just not sell E-Plus outside KPN Mobile. It's not an option. It would be cutting its own throat just to become an interesting takeover candidate,” said Kempen & Co analyst Wouter de Ridder, noting KPN would be selling for less than it paid.

“They would be giving up one of their crown jewels. What would be left is an incumbent with just exposure to Benelux.

KPN has 77.5 percent of E-Plus and BellSouth 22.5 percent after a late 1999 buyout that valued E-Plus at around 19 billion euros. BellSouth has an option to sell its stake from June 9 or convert it into shares in KPN's cellphone unit, KPN Mobile.

While Orange aims to be in 50 countries by 2005, Finance Director Graham Howe said this month the group had no current takeover plans and was focused on beefing up a German venture.

“Right now I have no plans and no need to utilise Orange currency for anything else (although) that doesn't mean I never will,” Howe told a May 17 debt conference. Orange is still keen to plug a gap in its European market by getting into Spain.

Howe predicted an era of close cooperation in Germany, Europe's most competitive telecoms market, especially in pooling costs of new mobile networks, and said he was confident there was room for the six rival mobile groups operating there.

In April E-Plus sealed mobile network sharing contracts with Mobilecom, and with Group 3G, owned by Spanish telecoms company Telefonica and Finland's Sonera.