STOCKS NEWS EUROPE-Pricey spectrum auction hits Telekom Austria

Shares in Telekom Austria (Xetra: 588811 - news) fall 4.5 percent after it says late on Monday that it will pay 1.03 billion euros ($1.41 billion) for new frequencies in an expensive Austrian spectrum auction, stretching its finances.

Morgan Stanley (Xetra: 885836 - news) cuts its target price to 5 euros from 5.60 and keeps its 'underweight' rating, saying the price will have a negative impact of 1 euro per share and raise the company's leverage above 3 times EBITDA (earnings before interest, depreciation and amortisation).

Shares in Deutsche Telekom (LSE: 0MPH.L - news) , whose T-Mobile Austria unit is spending 654 million euros in the auction, are also down 0.2 percent.

Telekom Austria said on Monday it would finance the purchase of the new frequencies, half those on sale, by a combination of existing cash and new debt, but Morgan Stanley says it may have to sell assets or carry out a capital hike.

Shares in the company are trading at 6.00 euros by 0707 GMT, and the stock's fall also underperforms a 0.4 percent decline in the European telecoms index .

($1 = 0.7312 euros)

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