France Telecom buys Meditel stake for $840 mn

RABAT, FRANCE: France Telecom said it signed a deal on Tuesday to buy 40 per cent of Moroccan telecoms operator Meditel for 640 million euros ($840 million), advancing its plan to tap into growth from emerging markets.

France Telecom Chief Executive Stephane Richard, speaking at a news conference in the Moroccan capital to announce the deal, also said he planned to increase the group's holding in Meditel to 49 per cent within the next five years.

France Telecom, Europe's third-largest telecoms operator, began looking for emerging markets opportunities as a way to offset sluggish demand and intense competition in Europe.

The French company aims to double revenue in emerging markets by 2015, largely through acquisitions worth 5 billion to 7 billion euros.

Its acquisition of the Meditel stake puts it in competition with Vivendi , which is majority owner of Morocco's former telecoms monopoly Maroc TelecomMaroc Telecom has a market share of about 50 percent and Meditel 30 percent.

Asked about the price France Telecom paid for its stake, Hicham Saadani, head of analysis and research at Moroccan bank BMCE, said: "The valuation makes sense.

"The valuation is not the most significant factor here because for France Telecom the operation is a strategic one."

Quest for growth

France Telecom CEO Richard said the acquisition was the first concrete step in his company's policy of seeking growth outside Europe.

"We plan to add 5 percent (to our stake in Meditel) in 2011 and then increase our holding in the company to 49 percent by 2015," Richard told the news conference.

"One of the plans for Meditel is to be listed on the (Casablanca) bourse in 2011. The details of this plan depend on the Moroccan shareholders," he said.

Anas Alami, CEO of Moroccan state investment vehicle and Meditel shareholder CDG, told Reuters details of the listing would depend on market conditions.

France Telecom shares closed little changed at 16.41 euros. The stock has lost 5.8 percent of its value so far this year compared with a 5 percent gain in the STOXX Europe 600 telecoms index .SXKP.

Meditel has been in the market for a major foreign investor since last year when two big shareholders, Spain's Telefonica  and Portugal Telecom, sold their stakes of 32.2 percent each.

Their shareholdings were bought by Moroccan private group FinanceCom and CDG for $1.15 billion in September.

FinanceCom and CDG had said they were not ruling out the possibility of bringing in a new shareholder if it added value to Meditel operations.

Analysts said the Moroccan government was eager to see a deal concluded as it wants cash to replenish the country's foreign currency reserves, which are under pressure from the rising cost of importing cereals and fuel.

BMCE analyst Saadani said Meditel's Moroccan shareholders would also benefit from the tie-up. "It is an excellent move by CDG and Finance to forge such an alliance with France Telecom, which will bring its expertise and know-how," he said.