America Movil Agrees to Acquire 21% Stake in Telekom Austria

Austria AG from investor Ronny Pecik, deepening Mexican billionaire Carlos Slim’s foray into Europe.

Slim’s wireless company purchased 5 percent of the shares and will acquire 16 percent later this year after regulatory approval, according to a filing today. America Movil didn’t disclose financial terms. At yesterday’s closing price, a 21 percent stake would be worth 748 million euros ($945 million).

The acquisition is part of America Movil’s strategy to establish footholds in Europe as the continent’s debt crisis hurts the value of telecommunications assets. Slim’s Mexico City-based company is also offering to boost its stake in former Dutch phone monopoly Royal KPN NV to 27.7 percent.

“This acquisition positions America Movil as a long-term strategic partner of Telekom Austria,” the company said. “It is part of America Movil’s geographic diversification strategy and provides an attractive presence in Central and Eastern Europe.”

A stake in Vienna-based Telekom Austria would give America Movil exposure to Belarus, Bulgaria, Croatia, Liechtenstein, Macedonia, Serbia and Slovenia in addition to the carrier’s domestic network. The company had 20.3 million wireless subscribers and 2.6 million fixed lines at the end of March.

Telekom Austria rose as much as 3.3 percent to 8.30 euros and traded at 8.22 euros as of 9:13 a.m. in Vienna. The shares had declined 13 percent this year through yesterday.

Ownership Limit

 Pecik, who holds his stake together with Egyptian billionaire Naguib Sawiris, said in a statement that America Movil will be “a strong shareholder for a secure and stable future” of Telekom Austria. Sawiris said in an interview today he and Pecik made a “nice profit” from the transaction.

“Everyone is happy,” Sawiris said.

Austria’s state assets agency OeIAG had no immediate response. OeIAG is Telekom Austria’s biggest shareholder and owns 28.4 percent of the company.

In November, Austria amended a law to limit ownership of infrastructure companies by non-Europeans. A new clause in the country’s Foreign Trade Act states that stakes of 25 percent or more require approval by the Ministry of Economics unless the investor is from the European Union, the European Economic Area or Switzerland.

Eastern Exposure

It is unlikely that Slim will gain control of Telekom Austria, Dominik Klarmann, an analyst at HSBC Trinkaus & Burkhardt AG, said in a June 13 research note. He has a neutral rating on the stock.

“We see no indication that the state is willing or in need to sell its stake,” Klarmann said. America Movil “could be taking advantage of attractive valuations” and “targets operating in countries that present less economic risk.”

Telekom Austria has stakes in wireless carriers in seven eastern European countries. While the former Austrian monopoly originally built its international network to compensate for slowing growth at its home market, weakening economies and currencies in eastern Europe have hurt its earnings.

Telekom Austria, the subject of parliamentary corruption hearings in the last year over improper payments, has been slashing jobs in Austria to cut costs. The company reported net income of 46.9 million euros in the first quarter, compared with a loss of 79.2 million euros a year earlier.

 ‘Good Moment’

The company’s operations in Belarus, where Telekom Austria bought the country’s second-biggest mobile-phone company in 2007, continue to be a drag on earnings. Hyperinflation in Belarus and foreign-exchange translations reduced sales by 96.5 million euros in the first three months of the year.

Slim is turning to Europe as subscriber growth slows in markets such as Brazil and Mexico. Slim’s son, America Movil Co- Chairman Carlos Slim Domit, said last month that the Mexican billionaire sees Europe’s debt crisis as a “good moment” to apply his strategy of investing in times of trouble.

America Movil in May made an unsolicited offer of 2.6 billion euros to increase its stake in KPN. KPN said the offer is low and hired investment banks to explore options.

With the purchase of the 5 percent stake, America Movil said it owns 6.7 percent of Telekom Austria and would own 23 percent when the additional 16 percent stake is acquired.

Pecik will remain vice chairman of Telekom Austria’s supervisory board, America Movil said.