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RCS&RDS really wants to buy UPC. The acquisition would create a monster

Autor: Cristian Hostiuc, Adrian Seceleanu

25 feb 2011 93

Telecommunications operator RCS&RDS, controlled by Oradea businessman Zoltan Teszari, 41, is one step away from buying rival UPC, formerly Astral, its fierce rival for over 15 years on the cable market, in a transaction that could amount to around 300 million dollars.

According to market sources, Teszari - who holds 43% in RCS&RDS, is in the process of selecting the investment bank for the financing of this transaction which, if concluded, would fundamentally change the entire Romanian telecom market, which is extremely fragmented and where competition is extremely tight. The other shareholders of RCS&RDS are investment funds Epic and Quadrant and a few Romanian businessmen and managers of the firm.

Teszari has had talks with investment banks since the end of last year, which included Goldman Sachs, Credit Suisse and Morgan Stanley, in order to structure such a transaction. He is now in the process of selecting the bank that will go ahead. Talks are held in Vienna. Bankers should offer RCS&RDS, a company with revenues in excess of 700 million dollars, financing both for the acquisition and for rescheduling debts that RCS&RDS is due to pay in the coming period. This year the company needs to pay back 175 million dollars, and, according to market source, "the problem is solved in part".

Liberty Global, UPC shareholder, last year hired investment bank Rothschild to find solutions for UPC Romania, which in 2004 bought local cable operator Astral for 400 million dollars.

Whilst in 2005 UPC became number one on the cable market, "the street fight" that followed was won by RCS&RDS through an extremely aggressive pricing policy and by attracting customers at any cost. After five years of fighting, RCS&RDS has nearly three times as many cable TV customers as UPC. So Liberty needs to find a solution, and, according to the quoted sources, it could be willing to sell Romanian operations. Whilst the first time that Rothschild went looking for potential interested parties, no telecom group was wiling to pay the 700 million dollars asked by the seller, the current 300 million dollars seem a much more reasonable price, and RCS&RDS is about to make a move that would stun the entire telecom market.

If the two rivals were to become one, it would create a "monster" on the Romanian market, with four million customers on the television segment alone, 1.7 million customers for fixed telephony, 1.4 million for mobile telephony and 1.4 million for fixed internet services.

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