Telenor to decide on sale of assets in Central and Eastern Europe in Q1

By bne IntelliNews January 28, 2018

Norwegian telecommunications group Telenor has confirmed rumours that it has received an unsolicited offer for its business in Hungary, Bulgaria, Montenegro and Serbia and said that it will decide on a possible sale in the first quarter of the year.

“With a view of creating shareholder value, Telenor has engaged in a process to evaluate the interest received. Telenor expects to conduct these assessments in the first quarter of 2018. The assessment will not impact Telenor’s operations, customers or employees,” the company said in a press release on January 26.

Earlier in January, Telenor was reported to be in talks with an unnamed US fund on the sale of its assets in Bulgaria, Serbia, Montenegro and probably Hungary for €2bn. The name of the buyer is still unknown, but a source quoted by Bulgarian daily Capital has said it does not have a presence on the SEE mobile phone market. However, there is also speculation the investor could be US fund KKR, which owns a satellite TV operator in Serbia and was linked with Telenor’s Serbia unit in June 2017.

Telenor's mobile operations in the four countries, Hungary, Bulgaria, Montenegro and Serbia, contributed 9% of the group’ revenue and 8% of the ebitda in 2017. In terms of revenue, the Hungarian unit was the largest with NOK4.3bn (€450mn), followed by Serbia and Montenegro NOK3.7bn (€387mn), and Bulgaria NOK3.12bn (€312mn).

The company has some 10mn customers in the four markets – 3.4 mn 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 some 1mn subscribers in the last three years, Hungarian business portal writes. The divestment of the assets would fit with Telenor’s fundraising and cost-cutting strategy as the company is planning attempts to refocus the business and pursue its digital transformation strategy.

Telenor entered the Bulgarian market in 2013, acquiring mobile operator Globul and retailer Germanos Bulgaria from Greece's OTE for €717mn, later merging the two companies. In the first nine months of 2017, Telenor Bulgaria's earnings before interest, taxes, depreciation and amortisation (Ebitda) edged down 0.2% y/y to some €99mn. On the Bulgarian market, Telenor competes with Mtel - the local unit of Telekom Austria, and Bulgarian telecommunications group BTC, which operates under the brand Vivacom.

Telenor entered the Serbian market in 2006, acquiring a 70% stake in Mobi63 for €1bn. Subsequently, the Norwegian company also acquired the remaining 30% stake. Its wireless unit competes with Telekom Srbija's mobile arm, MTS, and VIP Mobile, a unit of Telekom Austria Group. The company said in 2016 that it planned to invest over €40mn in the development of 4G services for the Serbian market during the year, and could launch 5G services by 2020.

In Montenegro, Telenor has owned the biggest telecommunications company since 2004. It competes with T-Mobile, owned by the Hungarian unit of Deutsche Telekom, Magyar Telekom, and with M:tel, which is majority owned by Telekom Srbija.

In Serbia and Montenegro, Telenor's combined Ebitda remained almost unchanged y/y at €110mn in the first nine months of 2017.

The suspicion that Hungary might also be involved the sale was based on the fact that the four countries together belong to Telenorʼs Central European cluster, overseen by Alexandra Reich, CEO of Telenor Hungary since October 2016.

Telenor’s possible exit from the Hungarian market has raised speculation about possible state involvement. Government office chief Janos Lazar said recently that if the ruling Fidesz wins the April election, the government will make renewed efforts to establish a state-owned mobile company. 

Hungary tried to bring a domestic player to the market using a consortium of state-owned companies in 2012, when the would-be fourth mobile operator MPVI Mobil was awarded a license. A year later, Hungary’s highest court, the Curia, annulled the mobile frequency auction, ruling that it was unlawful. Five years ago rumours spread on the market that Vodafone was in talks with the government on the sale of its Hungarian unit, but it was refuted by both parties.




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