Swisscom "Wants" to Buy FastWeb

Swisscom AG, Switzerland's largest telephone company, offered to buy Italy's FastWeb SpA for 3.7 billion euros ($4.9 billion) in cash to add a million broadband Internet customers.

Swisscom offered 47 euros for each FastWeb share, or 12 percent more than the closing price of 42.02 euros on March 9, Bern, Switzerland-based Swisscom said in a statement today. Shares of FastWeb were suspended in Milan before the company's board meets to discuss the bid.

Swisscom reported four consecutive quarters of declining profit and in August cut its earnings forecast as rivals use price cuts to gain customers. The company's fixed-line division has been losing market share in the country of 7.4 million people since the state opened the market to competition in 1998.

``Strategically it's a good acquisition,'' said Tomas Hilfing, a Zurich-based analyst at Helvea AG with a ``neutral'' rating on the stock. ``Fastweb is growing very fast, they're very well positioned and they're strong in broadband. Swisscom is buying growth, which has always been its problem.''

A purchase would be the biggest for state-controlled Swisscom since the government banned the former monopoly from buying so-called incumbent phone operators abroad in 2005. Chief Executive Officer Carsten Schloter on a conference call said the Swiss government backs the planned purchase and that Swisscom may close the transaction as early as June.

`Strategic Options'

Swisscom plans to finance the purchase with debt and a sale of as many as 4.9 million company shares that Swisscom repurchased. The offer is conditional upon Swisscom gaining at least 50 percent plus one share in FastWeb, Swisscom said.

``Italy is one of the most attractive broadband markets in Europe with significant expected growth potential over the next few years,'' Swisscom said in its statement.

A FastWeb spokeswoman who asked not to be named declined to comment on Swisscom's offer when reached by telephone. FastWeb Chairman Silvio Scaglia, who is under investigation in Rome for alleged criminal association and false communication, owns 19 percent of Fastweb. Schloter on a call said he's confident Scaglia will sell once the board backs the deal.

FastWeb, founded in 1999 by Scaglia, reported 2006 earnings, before interest, tax, depreciation and amortization of 425 million euros, an increase of 39 percent from a year earlier. Sales rose 30 percent to 1.26 billion euros. The company, which posted 2006 net loss 124 million euros, forecast it will have its first full-year net income in 2007.

Government Corset

The Swiss government held 54.8 percent of Swisscom at the end of 2006. The state must hold at least a 50 percent stake plus one vote by law. Its 2005 purchase ban forced Swisscom to end talks to buy Ireland's Eircom Group Plc and sparked the resignation of former CEO Jens Alder. Eircom was later acquired by a group led by Australia's Babcock & Brown Capital.

Swisscom in December repurchased a 25 percent stake in its wireless unit from Vodafone Group Plc for 4.25 billion Swiss francs. FastWeb shares on March 9 had their biggest gain in almost six months on speculation that Vodafone, the world's largest mobile-phone operator, may make an offer.

In 2005, Egyptian financier Naguib Sawiris bought Wind Telecomunicazioni SpA from Italian utility Enel SpA in a bid valuing the business at 12.2 billion euros.

source:www.bloomberg.com