France Telecom to Sell Orange Switzerland Unit to Apax for $2.1 Billion

By Matthew Campbell and Aaron Kirchfeld - Dec 24, 2011 7:39 AM GMT+0700

France Telecom SA (FTE) agreed to sell its Swiss mobile-phone unit to Apax Partners LLP for 1.6 billion euros ($2.1 billion).

The deal is subject to approval by Swiss authorities and will be submitted to France Telecom’s board the week of Jan. 9, according to a statement. Apax, the London-based buyout firm, beat out bids from EQT Partners AB, Providence Equity Partners Inc. and French telecommunications billionaire Xavier Niel, two people with knowledge of the situation said yesterday.

France Telecom is shedding assets in Europe, where multiple phone companies are vying for a shrinking pool of new customers, to embrace faster-growing markets in Africa and the Middle East. The Paris-based mobile operator, France’s largest, is also in talks to sell its Orange Austria unit to Hong Kong-based Hutchison Whampoa Ltd. (13), people familiar with the situation said in October, and is planning to exit Portugal.

“It makes sense to exit the difficult Swiss market and may give them more flexibility on the cash-flow side,” said Giovanni Montalti, a London-based analyst at Credit Agricole Cheuvreux, who rates the stock “underperform.”

Perella Weinberg Partners LP and Lazard Ltd. (LAZ) are advising France Telecom on the Swiss sale. Officials at EQT and Providence couldn’t be reached for comment yesterday by telephone.

Apax’s History

Apax, run by Martin Halusa, has participated in more than 20 deals this year, including last month’s purchase of U.S. wound-treatment company Kinetic Concepts Inc., its largest in 2011, according to Bloomberg data. The firm has amassed about half the 9 billion euros it’s seeking for its latest fund, three people with knowledge of the plans said this month.

The decision by France Telecom to pursue a sale of the Swiss unit to Apax follows last year’s bid to merge the business with rival Sunrise, a deal rejected by regulators. Sunrise’s owner, CVC Capital Partners, was earlier excluded from the sale process for Orange Suisse, although the firm discussed assisting Providence with arranging financing in the hopes of attempting another merger, according to people with knowledge of the talks.

A combination of Orange Switzerland with Sunrise would leave the country of about 8 million residents with two mobile operators: the merged entity and Swisscom AG, the former Swiss phone monopoly. By comparison, the U.K., Germany and Italy all have four full-service mobile-network providers.

Orange Suisse

Orange Switzerland, founded in 1999, had revenue last year of 1.3 billion Swiss francs ($1.39 billion). The company, which employs about 1,200, had a customer base of 1.6 million at the end of September, according to the statement.

The value of the deal is 6.5 times Orange Switzerland’s estimated 2011 earnings before interest, taxes, depreciation and amortization, France Telecom said in the statement. That compares with a median Ebitda multiple of 5.6 paid for Western European telecommunications assets in the last 3 years, according to Bloomberg data.

France Telecom rose 0.8 percent to 11.97 euros in Paris trading yesterday. The shares have sunk 23 percent this year, valuing the company at about 32 billion euros.

The French phone company, led by Chief Executive Officer Stephane Richard, said Oct. 27 that third-quarter profit fell 6.2 percent as a revenue decline at home overshadowed growth in Spain and some African countries. The company said then that full-year operating cash flow will be “slightly” more than 9 billion euros, compared with a previous forecast of that amount.

Almost half the mobile operator’s 45.5 billion euros in sales last year came from France. In October, France Telecom agreed to acquire Congolese mobile operator Congo-China Telecom, entering its third new country in about a year.

To contact the reporters on this story: Matthew Campbell in Paris at mcampbell39@bloomberg.net; Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net

To contact the editor responsible for this story: Jacqueline Simmons at jackiem@bloomberg.net