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April 6, 2005

Telecom Italia acquires French ISP

Italian communications giant Telecom Italia has agreed to acquire Tiscali's 95% stake in LibertySurf, the French internet service provider (ISP).

By CBR Staff Writer

The price agreed for Tiscali’s stake is approximately 266m euros ($342m). Once the transaction is finalized, Telecom Italia will launch a public offer for the remaining 5% of Liberty Surf’s share capital, as required by law.

Finalization of the transaction is conditional on approval by the French antitrust authorities.

LibertySurf is a prominent ISP in France and it has a nationwide presence. It is thought to have just over one million customers, with approximately 344,000 broadband customers and approximately 700,000 dial-up customers (of which 448,000 are retail). The company’s 2004 revenues totaled 225m euros ($289m).

It was put up for sale in order to help Cagliari, Italy-based Tiscali (Europe’s third largest ISP) repay maturing bonds, specifically a 250m euros ($321m) loan that is due in July. Last year it raised 170m euros ($219mm) by offloading businesses in Austria, Norway, Sweden, Switzerland, and South Africa, as well as by offering new stock. The ISP said it would instead focus on the core countries of France, Germany, Italy and the UK.

However, these assets sales did not raise as much money as expected, and Tiscali was forced to put its French unit up for sale. Certainly, the 266m euros ($342m) purchase price that Tiscali will receive, is significantly less than the 656m euros ($843m) it paid for the unit back in January 2001.

Telecom Italia has also lately been selling off assets in order to reduce it massive debt burden. Just days ago it sold its Greek mobile phone unit, TIM Hellas Telecommunications SA, for 1.1bn euros ($1.4bn).

However, the Italian giant is also in the process of taking over its 86%-owned Telecom Italia Mobile unit in a 21bn euros ($26.96bn) cash and share buyout. This could push Telecom Italia’s debt up from 30bn euros ($38.52bn) to about 44bn euros ($56.49bn), which means that more asset sell-offs are vital for Telecom Italia if it is to keep its debt burden at a manageable level.

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