Eircom investor in Deutsche Telekom deal

28 Jan 2003

Europe’s biggest telephone company Deutsche Telekom has sold six cable TV networks to a consortium of investors, including Apax Partners, Providence Equity Partners and Goldman Sachs, for €2.1bn.

Providence Equity Partners was one of the investors in the consortium led by Sir Anthony O’Reilly that acquired Eircom for over €2bn last year.

The full consortium in the Eircom acquisition included Sir Anthony O’Reilly, Mr George Soros, Providence Equity Partners and the Eircom employee share ownership trust. The consortium borrowed €2.4bn to buy the company. Providence manages more than €5bn in private equity funds and focuses on investments in the media and telecoms industries. It has worked with O’Reilly’s Independent News & Media in recent months to make a €200m bid for Scottish Media Group.

Under the terms of yesterday’s deal, Deutsche Telekom will get €1.73bn in cash and as much as €375m depending on certain contract terms that the firms was unwilling to disclose.

The deal will give Goldman Sachs, Providence Equity and Apax Partners control of TV networks in six German states, including Bavaria and Berlin and access to some 10 million German households. The move is the latest in a series of measures taken by Deutsche Telekom’s new CEO Kai-Uwe Ricke, which include the selling off of real estate, shares in a satellite operators and shares in its internet unit, T-Online.

Europe’s largest telco (telecommunications company) has succumbed to the malaise that has spread through the telecoms sector resulting in mass job losses and decline in revenues and shareholder value. At present Deutsche Telekom is €64bn in debt, about a quarter of its total market value. Ricke has pledged to cut this debt by some €50bn by the end of this year.

The three firms that are buying the cable TV assets, Goldman Sachs, Providence and Apax have raised billions of euro worth of funds to invest in media and entertainment opportunities. For example, Apax has €4.4bn under management and has invested in more than 300 media companies, including Virgin Radio. Likewise, Goldman Sachs counts investments in the Yankees Entertainment & Sports TV network.

By John Kennedy