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Swisscom rings up big loss on debitel

debitel had become only a financial investment for Swisscom Keystone

Switzerland’s leading telecommunications operator, Swisscom, has sold its 95 per cent stake in the German mobile phone company, debitel, at a considerable loss.

This content was published on April 30, 2004 - 11:53

A group led by the British-based private equity firm, Permira, is to buy debitel in a deal worth €640 million (SFr994 million).

Swisscom bought debitel in several stages during the telecoms bubble at the turn of the century for a total of SFr4.3 billion.

The deal to sell debitel, which sells mobile phone calls without operating its own network, had been expected by the markets for some time.

“It’s not a surprise that Swisscom sold debitel as it said it was a financial investment and not a strategic investment,” analyst Serge Rotzer at Zurich Cantonal Bank told swissinfo.

“The [profit] margins of debitel are very low and it didn’t fit into the strategic intentions of Swisscom.”

Acquisition

Rotzer said Swisscom had wanted to use debitel to acquire a third generation cellular telephone licence in Germany, the so-called UMTS or Universal Mobile Telephone Service, and gain access to the German market.

“But debitel didn’t buy a UMTS licence and so Swisscom wasn’t interested any more in operating debitel,” he added.

At the height of the euphoria over UMTS licences in 2000, six operators in Germany shelled out €50.5 billion to obtain a licence after 173 rounds of an auction which lasted 14 days.

In a statement from its headquarters just outside Bern, Swisscom said that expected synergies failed to materialise due to differences in the business models of Swisscom and debitel, and the performance of European mobile communications markets following the auction of the UMTS licences.

Financial investment

As a result, the company had managed debitel as a purely financial investment.

Swisscom said that it was granting the buyer a vendor loan of €210 million for the purchase. After deduction of this loan, Swisscom will receive €430 million.

Permira is offering to buy the remaining five per cent of debitel, or around 4.5 million shares, for €11 per share in a public offer, adding as much as €50 million to the deal.

Swisscom said it did not expect a book gain or loss in 2004 from selling its debitel stake. It added that debitel’s current book value stood at SFr850 million.

Zurich Cantonal Bank’s Serge Rotzer told swissinfo there were a number of options now open to cash-rich Swisscom.

“I guess that Swisscom can invest the money better than in debitel. It is still looking [to buy] Telekom Austria and it could invest it there. Otherwise it could give it back to its own investors,” he commented.

The takeover, which is subject to approval from antitrust authorities, is expected to be completed by the end of June.

swissinfo, Robert Brookes with agencies

In brief

Swisscom is selling its 95 per cent stake in debitel for €640 million (SFr994 million).

The company had bought debitel in several stages for a total of SFr4.3 billion.

debitel, which did not receive a UMTS licence in 2000, was lately regarded by Swisscom as a purely financial investment.

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Key facts

debitel is the third-largest mobile operator in Germany after T-Mobile and Vodafone.
It sells mobile phone services by piggy-backing on other operators' networks to ten million customers in Europe - 8.1 million of them in Germany.
Net profit at debitel in 2003 was €56 million on a turnover of almost €3 billion.
The Stuttgart-based company employs 3,100 staff and has operations in France, the Netherlands, Denmark and Slovenia.

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