Telenor has agreed to sell its subsidiaries in Bulgaria, Hungary, Montenegro and Serbia to Czech investment group PPF Group for €2.8bn, it was announced on March 21. The transaction is expected to be completed within Q3 2018 and requires regulatory approval.
The company has some 10mn customers in the four markets – 3.4mn in Bulgaria, 3.3mn in Serbia and Montenegro, and 3.1mn in Hungary – or 5.5% of its total base, but the company has lost 1mn subscribers in the last three years.
The parties have agreed on a deferred purchase price, where €400mn of the proceeds will be paid in four instalments over four years. The agreed transaction price corresponds to an enterprise value (EV)/Ebitda multiple of 6.4 based on 2017 Ebitda.
Telenor is a leading provider of telecommunications and mobile services in Scandinavia, Central and Eastern Europe and Asia. The CEE subsidiaries recorded combined revenues of NOK11.8bn in 2017, or 9% of overall sales. In terms of revenue, the Hungarian unit was the largest with NOK4.3bn (€450mn), followed by Serbia and Montenegro (NOK3.7bn) and Bulgaria (NOK3.12bn).
PPF’s European ambitions
The PPF Group, in addition to full control over the Telenor mobile operator in these countries, also acquired the right to use the Telenor name by mid-2021, as well as the real estate used to run the company.
PPF – owned by Petr Kellner, Central Europe’s richest man – is the largest private investment firm in the CEE region managing €35bn in assets. Its portfolio includes banking, consumer finance, real estate, media, telecommunication and mining, and it recently acquired Skoda Transportation, the Czech manufacturer of electric trains, trams and buses.
"With this acquisition [of the Telenor assets], PPF Group is expanding its telecom portfolio by four other countries and realizing its long-term goal of becoming a medium-sized European operator. We want to use our experience to strengthen our market position,” said Ladislav Bartoníček, PPF Group’s shareholder responsible for telecommunications assets.
Telenor has had mobile operations in the CEE region for 25 years. It entered the Hungarian market in 1994 through the acquisition of Pannon and later expanded its presence in the region through the launch of mobile services in Montenegro in 1996 and the acquisition of Mobi 063 in Serbia in 2006. Finally, Telenor acquired Globul in Bulgaria in 2013.
"Following the transaction, Telenor's footprint will consist of integrated fixed and mobile operations in Scandinavia, and strong mobile positions in Asia," CEO Sigve Brekke said in a statement. The board will request a payment of NOK4.4 special dividend per share on the successful closing of the transaction.
Hungarian oligarch eyes Telenor’s local subsidiary
Meawhile, there is market speculation that Hungarian group Konzum, owned in part by Prime Minister Viktor Orban’s proxy Lorinc Meszaros, would still be interested in acquiring the Hungarian subsidiary after the PPF transaction. The company made an indicative bid for the four Telenor companies in January.
Konzum Holding's strategic development plan includes acquisitions in the IT and telecommunication sector and Telenor fits into that strategy, said Konzum chairman-CEO Gellert Jaszai said at the time.
Hungary's Telenor is the second largest player on the market with a 27.5% market share, far behind market leader Telekom, which has 47.5% of the market. Telenor Hungary's market value could be between HUF235-325bn, according to estimates of Hungarian business portal Portfolio.hu.
Konzum’s potential move to acquire Telenor Hungary would be in line with strategic goal of the Orban government to boost domestic ownership of companies in strategic industries. The chief of staff of the prime minister Lazar Janos floated the idea of establishing a state-owned mobile operator. Janos said earlier that the question would be on the agenda if Fidesz wins the April election 8.
The state tried to break into the market with the consortium of state-owned companies in 2012, when MPVI Mobil was awarded a license that would have seen it become the country’s fourth mobile operator, but a year later Hungary’s highest court, the Curia, annulled the mobile frequency auction, ruling that it was unlawful.
Telenor Hungary said that obligations linked to its spectrum licenses regarding service quality and technical parameters would remain in force regardless of the companyʼs owner. Any possible change in ownership will not affect these parameters, service quality or contractual framework, it added.