Copper giant wants to merge telecom arm before dumping fixed-line assets

Copper and silver miner KGHM Polska Miedź wants to merge its loss-making telecoms unit Dialog with other independent operators before disposing of its fixed-line phone assets, Andrzej Szczepek, KGHM's chief financial officer announced last week. He said KGHM would hire global financial firms JP Morgan and ABN Amro to advise it on the sale of Dialog, which has long been financed by KGHM and whose losses have pushed the group into the red. Szczepek did not indicate when KGHM planned to sell Dialog, but said the timing of the entire process hinged on the pace of consolidation among domestic telecom companies.

Analysts had hoped for a quick sale to help rid KGHM of hefty financing costs, but this new strategy may extend the time horizon of the sell-off until at least next year. Szczepek added that KGHM's self-imposed zł. 100 million ($24.4 million) lending cap for Dialog in 2002 would be intact, while the miner's core business remained upbeat in the third quarter and prospects were good for the fourth. KGHM, which at the end of last year had taken over Dialog bonds worth zł. 1.21 billion ($295 million), amounting to half its debt, is under pressure to exit from investment-intensive fixed-line telephony, restructure its debt and turn around group results. "The optimal option would be to consolidate Dialog into an entity that would be able to take on its own debt, freeing KGHM from financing its (fixed-line) subsidiary," Szczepek said. - Reuters