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In Esat deal, Norwegian firm gets profit windfall>

February 16, 2011

By Staff Reporter

By Andrew Bushe

DUBLIN — An Esat share swap or sell-out deal agreed to between British Telecom and Telenor has revealed that the Norwegian company could realize a profit of more than $1 billion from its four-year involvement with the Esat Digifone mobile phone consortium.

Morten Sorby, managing director of Telenor International, said the company had made a tenfold increase in its initial investment in Digifone.

"It’s a huge profit and it reflects the status of the telecoms markets right now. It’s not a pure Irish phenomenon," he said.

The Esat group accepted a counter bid by BT worth $2.461 billion in response to a hostile offer by Telenor.

As the so-called "white knight," BT won the battle to take over Esat, but, ironically, the new deal could result in Telenor ending up owning 49.99 percent of the overall group.

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Telenor had already owned 49.5 percent of the Esat Digifone mobile arm, having become a key member of the Denis O’Brien-led consortium that was awarded the license by former Fine Gael Minister Communications Minister Michael Lowry.

Telenor now have the option of swapping its mobile company shareholding for a 33 percent stake in the overall Esat group.

If it opts for the share swap, Telenor will have the additional right to buy extra Esat shares from BT to increase its stake in the Irish group to 49.99 percent.

This would cost Telenor $624 million, plus accruing interest, until it is exercised.

BT would retain rights of control of Esat, including the appointment of the chairman of the company. BT have asked Esat’s chairman and chief executive Denis O’Brien to remain on as chairman.

If Telenor does not want to stay with the Irish company, it can sell its 49.5 percent shareholding in the mobile arm to Esat for $1.238 billion.

Telenor spent less than $150 million to pay for its half share of the initial cost of the £15 million mobile phone license and the development and roll out of the network.

Esat is the second-biggest operator of fixed telephone lines and mobile phones in the country, the biggest operator of Internet services for companies and one of the biggest providers of Internet services for consumers.

It is expected that Telenor will hold onto its Esat shareholding. Telenor chief executive Tormod Hermansen said he is satisfied with the deal.

"We have achieved our objective of being able to extend our strong position in Ireland," he said. "We are delighted to be working with BT to achieve this."

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