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America Movil says not planning hostile bid for Telekom Austria

By Georgina Prodhan

VIENNA (Reuters) - America Movil does not plan a hostile takeover bid for Telekom Austria following its failed attempt to buy Dutch company KPN , its chief executive said.

There has been speculation in recent months that the Mexican Telecommunications group controlled by billionaire Carlos Slim might try to take over Telekom Austria, which it already owns part of.

But CEO Daniel Hajj said America Movil had not acquired its stake a year ago in order to mount a takeover and saw itself as a stable partner of fellow large shareholder Austria.

"You can expect many things from us but nothing hostile," Hajj told News magazine in an interview published on Thursday. "We choose our common path with our partners in Austria."

America Movil owns 23 percent of Telekom Austria, the Alpine country's largest carrier which is also active in central and eastern Europe, and the Austrian government owns 28 percent. Slim's family holds a further 3 percent.

Hajj said he saw a capital increase by Telekom Austria as "very likely" after an unexpectedly expensive Austrian frequency auction which will cost the operator 1.03 billion euros ($1.38 billion), about 38 percent of its market value.

A person with knowledge of the matter later told Reuters Telekom Austria is planning a new bond with a volume of roughly 500 million to 750 million euros ($670 million to $1 billion), likely in the next two to three weeks.

The Austrian firm on Thursday reported declining quarterly earnings and revenues as it spends heavily to keep premium customers in Austria and faces economic weakness abroad, highlighting its limited ability to finance the auction alone.

When asked whether America Movil would participate in a capital increase, Hajj - Slim's son-in-law - said it would remain a "stable partner".

Hajj did not say whether America Movil would maintain or raise its stake in any capital hike, and when asked about the matter, the company declined to comment.

America Movil spooked investors last month with a lack of clarity over its plans in Europe, where its investments have driven up debt and contributed to financial expenses that almost halved its third-quarter profit.

The company gave up its 7.2 billion-euro plan to buy the whole of KPN after a foundation set up to protect KPN shareholders' interests moved against it.

At Telekom Austria, a capital increase widely expected to take place after approval from the company's shareholder meeting next May would be an opportunity for America Movil to increase its stake without provoking political opposition.

The Austrian government, facing a $25 billion fiscal gap due to costly bank bailouts, is unlikely to be able to afford to keep pace, though it has said it aims to keep at least 25 percent, enough to influence big decisions.

Telekom Austria shares, which have been buoyed by America Movil takeover speculation, were down 1.9 percent to 6.01 euros by 1048 GMT, the worst performers in the European telecoms index <.SXKP>, which was up 0.7 percent.

STIFF COMPETITION

The company's third-quarter core earnings fell 13 percent, hit by higher expenses for handset subsidies and personnel issues in Austria, and a drop in roaming revenues from Croatia after the Balkan country joined the European Union on July 1.

Earnings before interest, tax, depreciation and amortization (EBITDA) of 358 million euros and sales that fell 6 percent to 1.04 billion euros were broadly in line with expectations.

The company's three biggest markets - Austria, Bulgaria and Croatia - all had a tough quarter for which a better performance in Belarus and other markets could not compensate.

Telekom Austria said it had saved 113 million euros in the first nine months of the year. It gave no earnings forecast but reiterated it expected full-year revenues of around 4.1 billion euros, down from 4.3 billion in 2012.

It said it still planned a dividend of 0.05 euros per share for 2013 and said capital spending should be between 650 million and 700 million euros excluding costs for the Austrian auction, trimming its earlier plan to spend 700 million euros.

"This was expected to be a tough quarter. Results overall are decent, though the market may be concerned by the worsening trends in Austrian fixed, an asset viewed as relatively resilient," Citi telecoms analysts wrote in a note.

In Austria, the company managed to hold its total number of fixed-line subscribers steady thanks to additional broadband customers but average revenue per fixed line fell 4 percent to 30.9 euros as time spent on voice calls continued to fall.

Fixed-line customers, who spend more than mobile customers, are a key competitive advantage Telekom Austria has in its domestic market over its wireless-only rivals, T-Mobile Austria and Hutchison Whampoa's <0013.HK> H3G. ($1 = 0.7460 euros)

(Additional reporting by Elinor Comlay in Mexico City; Editing by Michael Shields, Pravin Char and Alden Bentley)

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