Increase by 16 to 51 percent - Ron Sommer: A strong presence in the telecommunications markets of Central and Eastern Europe and majority holdings are core elements in expanding our global customer base Deutsche Telekom and the government of the Republic of Croatia announced on Thursday that Deutsche Telekom has become a majority shareholder in the Croatian telecommunications company Hrvatski Telekom. Deutsche Telekom Chairman Dr. Ron Sommer and Croatian Prime Minister Ivica Racan signed the definitive agreement in Zagreb, allowing Deutsche Telekom to acquire an additional 16 percent of HT at a selling price of €500 million. Having increased its interest to a 51 percent majority shareholding, Deutsche Telekom can now fully consolidate HT in its operating results. The company acquired an initial stake in HT of 35 percent in October 1999. With this transaction, Deutsche Telekom - together with T-Mobile International - is present in every key market in Central and Eastern Europe.
Dr. Ron Sommer said: "A strong presence in the telecommunications markets of Central and Eastern Europe and the establishment of majority holdings in the region are core elements in the process of expanding our global customer base. Deutsche Telekom recognized the opportunities that were emerging throughout Eastern and Southeastern Europe earlier than its competitors and resolved to tap them. We are present throughout the region, from Poland to Slovakia and the Czech Republic, Hungary, Croatia and Macedonia, to Russia and the Ukraine, creating a footprint that is far more extensive than our competitors-."
Sommer expressed his firm belief that the markets in this important region will soon experience a surge in growth: "The demand for telecommunications services will be one of the driving forces behind the economic upswing", he said. Furthermore, Dr. Sommer emphasized HT's significant growth potential and promised that "we will do everything in our power to ensure that HT will remain the driving force in the future competitive landscape."
Prime Minister Racan underlined that the transaction also represents a major milestone in the government's privatization program. He continued: "We are very pleased that Deutsche Telekom has demonstrated its belief in the potential of the Croatian economy and has increased its investment here." He assured, that the Croatian Government will continue to work with Deutsche Telekom in a spirit of genuine partnership in order to assure HT and its employees a successful future.
Ivica Mudrinic, CEO of Hrvatski Telekom, stated: "For HT the closing of this transaction is a key step for future development of HT - which remains a Croatian company, integrated in the global development of Deutsche Telekom Group."
Deutsche Telekom and HT will invest more than €700 million through 2004 in order to support HT's transition from a state-owned company to a customer, service and market-oriented player. In addition, 300 new jobs for highly-qualified staff will be created, and training for roughly 3000 HT employees will be provided.
As the largest provider of telecommunications, HT is one of the leading companies in Croatia. HT is currently the only nationwide provider of voice services and has approximately 1.8 million customers. It also operates an analog and digital mobile communications network. Cronet, HT's GSM mobile communications operator, currently has approximately 800,000 subscribers out of a total population of four million. HT is also the leading provider of Internet and data services in Croatia. In the 2000 financial year, the company had approximately 11,000 employees and increased its revenue from €694 million in the previous year to €763 million. Income after taxes rose from €83 million to €120 million.
Deutsche Telekom's investments abroad over the last three years total approximately 60 billion euros, almost 8 billion of which was invested in Central and Eastern Europe. Revenue from the eight Deutsche Telekom subsidiaries and associated companies in this region, where 46,000 are employed, was roughly 5 billion euros last year. These Central and Eastern European companies made further investments of about 1.7 billion euros in modern network infrastructure and technology over the last year. In addition, with T-Systems represented in Poland, Hungary, the Czech Republic and Russia by its nearly 650 employees, Deutsche Telekom provides integrated telecommunications and IT solutions for business customers.
JPMorgan has acted as financial advisor to Deutsche Telekom's HT-transaction.