Polish Billionaire Regroups Assets to Fend Off Orange, T-Mobile

  • Cyfrowy gains access to high-speed mobile Internet network
  • Cyfrowy pays 1 euro, assumes 788 million zloty of Midas debt

Poland’s largest mobile phone operator agreed to buy another company controlled by billionaire Zygmunt Solorz-Zak to gain access to high-speed mobile Internet network services and fend off competition from the units of Orange SA and Deutsche Telekom AG.

Cyfrowy Polsat SA, Poland’s largest private television broadcaster and owner of mobile company Polkomtel Sp. z o.o. , will pay 1 euro for a 66 percent stake in Midas SA and take on 788 million zloty ($197 million) of the target company’s net debt, it said in statement on Monday. Separately, it announced a bid to buy the remaining stake in Midas at 0.81 zloty a share, offering a 11 percent premium to the closing price from Feb. 26. Cyfrowy and Midas are both controlled by Solorz-Zak, who also owns ZE PAK SA, a power producer, as well as a small lender Plus Bank SA.

The transaction “should not bring controversy” as minority investors were offered a premium, Przemyslaw Sawala-Uryasz, an analyst Pekao Investment Bank SA in Warsaw, said in a note. Total enterprise value implied by the potential transactions amounts to 1.2 billion zloty, “which is below our expected cost of the Midas acquisition,” he said.

Cyfrowy faces competition from the likes of Orange Polska SA, T-Mobile Polska and P4 Sp. z o.o. after they acquired high-speed mobile Internet frequencies earlier this year and are readying to expand their services. The Midas purchase gives Cyfrowy access to LTE 1,800 megahertz and 800 megahertz bands as well as HSPA+ 900MHz frequency, needed to meet surging demand for data transfer in Poland.

Shares in Cyfrowy dropped 0.7 percent to 23.1 zloty, while Midas jumped 9.8 percent to 0.8 zloty. the highest since October 2013, as of 12:31 p.m. in Warsaw. Cyfrowy’s Polkomtel is the country’s biggest mobile operator with 6.84 billion zloty of revenue last year.

Cyfrowy, which withdrew from bidding for new LTE frequencies in last year’s auction, plans to spend as much as 1 billion zloty through 2018 in the development of its current network, based on bandwidths owned by Polkomtel and Midas, Chief Executive Officer Tobias Solorz, the billionaire’s son, said in a statement. For Cyfrowy, it is “significantly cheaper” than it would be to buy spectrum in the auction, he said. Also, cooperation with competitors who bought frequencies “would be unprofitable and irrational.” Its rivals paid from 1.48 billion zloty to 2.2 billion zloty for a single bandwidth.

Separately, Midas said on Monday its net loss narrowed to 105.8 million zloty in 2015 from 320.9 million zloty a year earlier. Cyfrowy’s fourth-quarter net rose to 185.6 million zloty from 14 million zloty, it reported.

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