France Telecom buys 40% share in Meditel for USD837m

Mergers, Acquisitions and Financial Results

France Telecom (FT) has agreed to buy a 40% stake in Morocco’s second largest mobile operator Medi Telecom (Meditel) for EUR640 million (USD837 million) from its domestic owners, state investment vehicle Caisse de Depot et de Gestion (CDG) and private investment group FinanceCom. In a statement yesterday, FT, FinanceCom and Fipar-Holding (part of the CDG group) announced the signing of a memorandum of understanding (MOU) with a view to forming a strategic partnership in which FT will acquire an initial 40% share of Meditel’s capital and voting rights. Through this partnership, FT says it intends to leverage its marketing, commercial and technical expertise to contribute to the strategic development of Meditel in segments such as mobile voice and data communications, content, as well as in the business-to-business sector, whilst the three parties also agreed to float Meditel on the Casablanca stock exchange ‘in the short to medium term.’ The signing of the final documents and the closing of the transaction is expected to take place by the end of 2010. The final closing of the agreement remains conditional to the approval of the Moroccan regulator, the ANRT. Upon completing the ownership transaction, which values the company at EUR2.14 billion, FT said it will also take over 40% of Meditel’s shareholder accounts amounting to around EUR78 million. The French group said that it will consolidate the stake into its accounts by way of global integration from the fiscal year 2015.

Meditel had 10.4 million mobile subscribers at end-June 2010, putting it in second place in the market with a share of 37.3%. It had 225,000 3G mobile broadband internet subscribers at that date, putting it in third place in that market segment, whilst it also provides fixed line and broadband services including WiMAX. It posted full-year revenues of MAD5.3 billion (EUR465 million) in 2009 with an EBITDA margin of 40% and an operational cash flow of around MAD1.4 billion. Portugal Telecom and Spain’s Telefonica were long-term investors in Meditel, but sold their interests in September 2009 to the firm’s Moroccan shareholders. FT previously exited Morocco in August 2004 when it sold ISP Maroc Connect (Wanadoo), which went on to become cellular and fixed-wireless provider Wana (Inwi/Bayn), currently the country’s market leader in 3G broadband internet and fixed telephony in terms of subscriber numbers.

Stephane Richard, FT’s CEO, said: ‘The acquisition of this stake in Medi Telecom is the first concrete step in our new policy of expansion outside Europe, and contributes to our stated aim of doubling our revenues in Africa and the Middle East over the next five years.’ According to yesterday’s statement, Othman Benjelloun and Anass Houir Alami, respectively President of the FinanceCom Group and CEO of CDG, see the partnership as a strategic alliance that will strengthen the position of Medi Telecom in Morocco and will provide it with a platform for opening out across the Maghreb region and Africa. The transaction will create value for all Meditel shareholders, who will receive all its available cash flow as a dividend; it will be accretive for FT from 2011 in terms of cash flow per share and profit per share.