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By Sophie Sassard and Claire Ruckin
LONDON, Feb 8 (Reuters) - Private equity firms are revivingplans for a potential 10 billion pound ($15.7 billion) buyout ofthe UK's biggest mobile operator EE, encouraged by recent dealslike Virgin Media and Dell.
Big buyout companies including U.S.-based KKR andEurope's CVC Capital Partners are trying again topersuade banks to help fund a deal they have been unable to getoff the ground for the past year, people familiar with the talkssaid.
They hope that a recent pickup in debt and equity marketscould help them broker a more attractive alternative to thestock market listing that EE's owners France Telecom and Deutsche Telekom are planning to better reflectthe value of their UK joint venture.
Both Liberty Global 's $15.75 billion acquisitionof British cable company Virgin Media and Dell 's buyoutled by co-founder Michael Dell and private equity firm SilverLake involved a significant portion of debt funding and couldprovide a benchmark for private equity funds interested in EE,the people said.
EE, formerly known as Everything Everywhere, is the biggestmobile operator in the highly competitive British market withmore than 27 million customers.
"Virgin has created a window for very big deals and fundsare currently contacting banks again to discuss business plans,technical possibilities etc." said one of the people who hasbeen approached by some of the funds.
Two rival private equity consortia KKR and Apax on one sideand CVC and Blackstone on the other, are holding early-stagetalks with banks and other possible investors, but any bid forEE remains hypothetical, the people said.
BIG STRETCH
To get funding for an EE buyout, private equity firms would have to show how they aim to make money in Britain's mobilemarket, one of Europe's more competitive with operating marginsin the low- to mid-20 range compared with mid-30s for France andGermany.
In recent quarters, margins have nudged down at all ofBritain's big three mobile operators - EE, Vodafone andTelefonica's O2, as unlimited voice and data plans arebecoming more common, pushing prices down.
Bankers say the private equity firms are seeking debt ofaround 4.5 times 2013 forecast EBITDA (earnings before interest,tax, depreciation and amortisation), or 6 billion pounds.
"I am not saying it's easy, 6 billion pounds of debt is abig stretch. But it's feasible", one of the lenders said.
The size of the 3-3.5 billion equity part of the funding,which the buyout firms have raised from investors, would be thereal problem, he said.
In the deal for Dell, private equity firm Silver LakePartners is betting its biggest ever equity commitment of about$1 billion. [ID:nL5N0B1HE1}
Plugging the equity gap for EE would require at least threefirms to team up, another banker said.
This type of consortium approach has not succeeded sinceDanish telecom group TDC's buyout for 9.1 billion euros ($12.18billion)in 2006.
These deals tend to be difficult to execute because privateequity funds' backers, known as limited partners, usually prefereach fund to invest in a range different assets to spread risk,rather than take large bets on a single company.
It is also not clear whether EE's owners could be convincedto completely exit the UK, which although a tough market,remains an important one for them in terms of size.
EE's owners are expected to appoint banks in the comingweeks to advise on an possible initial public offering (IPO)this year, bankers said.
EE and all of the private equity firms declined to comment.
