German utility group E.ON said it was selling its 42.5 % stake in Swiss cellphone operator Orange Communications to France Telecom for at least EUR 1,6 billion. E.ON said the proceeds from the sale would be one quarter cash and three quarters equity. The equity would take the form of shares in a new Orange company which will include France Telecom's cellphone activities. E.ON said that under the terms of the deal, the sale price could rise by up to about 20 %, depending on the fee Orange pays for a UMTS next generation mobile phone licence in Switzerland. The 3G auction in Switserland starts on November 13. Orange is one of the participants in this auction. E.ON said an initial public offering for the new, bundled Orange company was planned for the first half of 2001. The German group said it had agreed to retain its Orange shares for at least one year after the flotation. In return, France Telecom agreed to a value guarantee that limits E.ON's upside and downside price risk to plus or minus 10 %. "Now is a particularly attractive time for us to sell," Ulrich Hartmann, E.ON Chief Executive, said. "The deal enables us to already realise the considerable value that this relatively new company will generate in the future."
