Exclusive: Deutsche Telekom eyes bid for Tele Columbus

Fri Apr 13, 2012 10:15am EDT
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By Philipp Halstrick and Victoria Howley

FRANKFURT/LONDON (Reuters) - Deutsche Telekom (DTEGn.DE: Quote) is considering a bid for regional cable company Tele Columbus to shore up its position in its key home market against competition from rivals Liberty Global and Kabel Deutschland, sources told Reuters.

By acquiring Tele Columbus, Deutsche Telekom would prevent it from falling into the hands of its cable rivals and send a strong signal that it is refocusing on improving its domestic business after the high-profile failure to sell its U.S. unit to AT&T (T.N: Quote) last year.

Cable companies can often offer internet speeds faster than Deutsche Telekom's copper networks, and the former state-owned incumbent has been wary of investing heavily in faster fiber broadband.

By buying Tele Columbus, Deutsche Telekom would also improve its broadband speed in regions where the cable operator is present like Berlin and eastern Germany.

However, the telecom giant will have to fight off Liberty's German unit Unitymedia (LBTYA.O: Quote) and Kabel Deutschland KD8Gn.DE which are also chasing the Tele Columbus deal that could be valued at 600-800 million euros ($790 million-$1 billion), bankers said.

Tele Columbus's owners, which comprise funds including York Capital and Golden Tree Asset Management, which took over after the company defaulted in 2010, have mandated Rothschild to organize the sale.

Less than ten funds control the lion's share of the equity, one of the owners said, adding that the investors have agreed not to sell for less than 600 million euros.

The German cable market was once one of Europe's most fragmented, with a proliferation of smaller regional players offering television and broadband services.   Continued...

Rene Obermann, CEO of Deutsche Telekom, participates in a U.S. House Judiciary Committe hearing on the proposed merger between AT&T and T-Mobile on Capitol Hill in Washington, May 26, 2011. REUTERS/Jason Reed