Telenor explores options for Nordic towers unit

Telenor has just exited what turned out to be a busy year, as it completed "quite a comprehensive list of strategic M&A transactions," according to group CEO Sigve Brekke.

"We divested a 30% stake in our passive fiber network to KKR, closed the largest telecom merger ever in Southeast Asia, locked in strong returns from selling Working Group Two [to Cisco], let go of our satellite business, and announced a sale of Telenor Pakistan," summarized Brekke.

Speaking during Wednesday's earnings call, Brekke said the focus of all this activity has been to "simplify the group, mitigate risk, and drive our value creation."

And it seems that Telenor is not done with tweaking what used to be a sprawling, international group — previously encompassing businesses in India, Russia and Myanmar — as it follows a strategy of developing or divesting assets in its portfolio.

Indeed, one focus this year will be on potentially monetizing the group's Nordic cellular towers business. "Extensive work has been done in terms of streamlining the tower business and setting ourselves up to potentially crystallize the tower values," Brekke said.

Tower talk

Telenor has already brought more than 20,000 towers in Norway, Sweden and Finland into Telenor Towers, which operates as an independent company.

During the group's Capital Markets Day in 2022, it was suggested that a potential towers deal might be possible in 2024. However, the first task was to improve the business performance of the unit by reducing costs, improving efficiency and increasing revenue through a higher number of external tenants.

Now, Telenor is ready to start exploring potential partnership opportunities or deals for its towers business. "We are in the midst of a financial and strategic analysis to see if we should do such a transaction during this year," Brekke said.

He also noted that more towers will need to be built in order to meet 5G coverage requirements. "However, that will not be a substantial number. We are also sunsetting the 3G network in this period," he said.

In terms of the wider Nordic market, Brekke said Telenor would still be keen to see some sort of telecoms market consolidation in Denmark.

"As we have said all along, if there is a chance to consolidate the Danish market, we think that should be done. But there is nothing new that we can talk about," he said.

Telenor and the former TeliaSonera abandoned previous efforts to merge their respective Danish businesses because of concerns raised by the European Commission.

In the meantime, Telenor is closely watching current European merger proceedings, including those in Spain and the UK, and is keeping abreast of any developments in Italy as Vodafone considers its options.

Solid year

Overall, Brekke described 2023 as a "solid year," with a 4% rise in organic service revenue to 62.5 billion Norwegian crowns (US$5.9 billion). EBITDA stood at NOK34.6 billion ($3.27 billion), corresponding to organic growth of 2.8% compared to the year before. Total free cash flow amounted to NOK15 billion ($1.4 billion).

Looking ahead to 2024, the group is guiding for low single-digit organic growth in Nordic service revenues, medium single-digit organic growth in both Nordic and Group EBITDA, and a Nordic capex to sales ratio of around 17%.

Also this week, Telenor said it would book an NOK8.04 billion ($761 million) non-cash impairment related to its stake in True Corp after the share price of the Thai mobile operator fell. The group currently holds a 30.2% stake in True Corp following the merger of Telenor's Dtac and Charoen Pokphand Group's True Corp last year.