KGHM wants to shed loss-making Dialog to boost profits

Copper and silver miner KGHM Polska Miedz wants to merge its loss-making telecoms unit Dialog with other independent operators before disposing of its fixed-line phone assets, its chief financial officer announced yesterday. Andrzej Szczepek said KGHM will hire 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 say when the firm planned to sell Dialog, but believes the timing of the entire process hinges on the pace of consolidation amongst 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 zl.100 million lending cap for Dialog in 2002 will 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 zl. 1.21 billion, amounting to half of 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 which would be able to take on its own debt, freeing KGHM from financing its (fixed-line) subsidiary," he told Reuters. (Reuters)