Deutsche Telekom AG to acquire Czech unit in a 1.1-billion-dollar buyout

Deutsche Telekom AG announced that it agreed to acquire full ownership of its Czech unit. The company depends on a recovery in the telecommunications in Eastern Europe, which is known to contribute almost a quarter of the carriers revenue.

According to an official statement made by Mid Europa Partners LLP, 828 million Euro (1.1 billion dollars) will be paid by the owner of the T-Mobile brand for the remaining 39.2% stake in the Czech unit from Falcon Group, which is 75% owned by Mid Europa. Deutsche Telekom made a separate press release, saying that the transaction will not demand regulatory approval.

This buyout is a part of the strategy of Timotheus Hoettges, the companys Chief Executive Officer, to extend Deutsche Telekoms reach in Eastern Europe. Currently, the company owns assets from the U.K. to the Balkans. People with knowledge of the negotiations reported in January that the carrier agreed to purchase the landline provider GTS Central Europe in November 2013 and has also offered to acquire an additional 10% stake in Hellenic Telecommunications Organization SA from the Greek government.

The companys revenues have been reported to decrease in the Czech Republic, but according to one of the analysts working for Cyrrus AS – Tomas Mencik, the countrys mobile data market “has good potential as it is still less saturated than in Western Europe”.

According to Andreas Leigers, a Deutsche Telekom spokesman, who cited rough estimates for the units fourth-quarter earnings, the acquisition provides T-Mobile Czech Republic with an enterprise value equivalent to about five times its earnings before interest, taxes, depreciation and amortization. Mr. Leigers also revealed that the unit has almost no net debt.

The companys operations in Europe are currently headed by Ms. Claudia Nemat. Ms. Nemat is planned to host a press event on February the 13th in order to introduce the progress of the company in developing an integrated network in the region of Skopje. Claudia Nemat said in the statement, which was cited by Bloomberg: “The purchase of the remaining shares is a logical step to optimize our portfolio and helps our development into the leading pan-European telecommunications provider.”

Deutsche Telekom AGs shares fell by 1.2% by 10:25 GMT to EUR11.66 in Frankfurt, extending this years drop which amounted to 5.4% as of February 7th.