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Deutsche Telekom has made its first acquisition in more than two years, after offering €1 billion to win control of Polska Telefonia Cyfrowa.

Although investors seem to be concerned about the possible impact on Deutsche Telekom's debt reduction program, the Polish mobile operator looks like an attractive investment.

Deutsche Telekom's offer to buy Polska Telefonia Cyfrowa (PTC) has prompted concerns that the German telecoms giant has returned to the expansionist ways that racked up an enormous debt pile during the telecom boom years.

Deutsche Telekom already owns a 49 per cent stake in PTC and the cash offer is to acquire the remaining 51 per cent it does not own. Deutsche Telekom said that the Polish utility Elektrim and French group Vivendi Universal invited it to make the offer.

The market had mixed feelings about the deal. There is some concern about how the acquisition will affect Deutsche Telekom's debt-reduction programme.

During the boom years, DT racked up nearly €64 billion in debt after an ambitious acquisition spree.

However, the German carrier recently revealed that it had clawed its way out of the red with net income of €256 million in its second quarter to June 30, up from a loss of €2.08 billion, on revenue 4.7 per cent higher at €13.59 billion.

It has also cut net debt to €53 billion, down €8.1 billion, through the sale of non-core assets. It insists it is on track to cut its debt pile to €49.5-52.3 billion by the end of 2003. Payment for PTC would be made in the first three months of 2004.

On paper, the deal appears to be good value. PTC is Poland's largest mobile operator and is profitable. It has 5.6 million subscribers as of the end of June, and is expected to post €100 million in net profit this year. Poland is also one of the most populous states in Eastern Europe, and only has a mobile phone penetration rate of 40 per cent, leaving plenty of scope for future growth.

Source: Computerwire/Datamonitor

Recommended research: Reuters Business Insight, "The Wireless Outlook" (RBTC0061)

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