Analysts appear split over value of Cosmote’s acquisition of Germanos

Shares in mobile operator Cosmote shed 2.35 percent yesterday over concerns it is overpaying for a major stake in a phone accessory retailer to boost its local and Balkan operations. The country’s largest mobile firm by users announced overnight it was buying 42 percent of Germanos for 19 euros a share from Panos Germanos and other shareholders, valuing the deal at 651 million euros ($825.4 million). «Reasoning and logic prevail. It is a little bit expensive,» said a trader who declined to be named. Analysts said Germanos, which offers products by Cosmote, Vodafone Greece and TIM Hellas, could lose the business of Cosmote’s two rivals, reducing the value of the deal. «Fully 55 percent of Germanos’ connection and average revenues per user (ARPU) share in Greece is from competitors (of Cosmote), who are likely to terminate agreements with Germanos,» Bear Stearns analyst Fanos Hira wrote in a note. This could reduce Germanos’s core earnings by about 45 million euros, he added. The retailer had earnings before interest, tax, depreciation and amortization (EBITDA) of 94.3 million euros in 2005. Germanos shares trade at 20 times estimated 2006 earnings, a discount to the multiple of 31 for Europe’s largest independent phone retailer Carphone Warehouse, according to Reuters Estimates. Cosmote said it planned to launch a tender offer after the end of August at 19 euros per share for the remaining Germanos shares. Cosmote shares trade at 17.31 times forecast 2006 earnings, cheaper than Spanish mobile operator Telefonica Movil’s 19.11 times. Other analysts took a broader and more strategic view of the Germanos stake buy, saying it was expected to boost Cosmote’s earnings per share while reinforcing its retail presence locally and abroad. The operator said it would finance the acquisition by debt. (Reuters)