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Telenor Offloads Its CEE Unit for €2.8B

Ray Le Maistre
3/21/2018
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Telenor has retreated from Central and Eastern Europe (CEE) after 25 years of operations in the region with the sale of assets in four countries to private equity firm PPF Group for €2.8 billion (US$3.44 billion).

PPF is acquiring Telenor's mobile operations in Hungary, Bulgaria, Montenegro and Serbia, as well as regional systems integrator Telenor Common Operation. Those operations together have more than 9 million customers and 3,500 staff and, in 2017, generated revenues of 11.8 billion Norwegian kroner ($1.52 billion), about 9% of Telenor's total, and earnings before interest, tax, depreciation and amortization (EBITDA) of NOK4.1 billion ($530 million), about 8% of Telenor's total. PPF will also have the right to use the Telenor brand until mid-2021.

The move had been expected, though another investment fund, KKR, had earlier been identified as a likely buyer. (See Telenor Eyes Eastern European Exit.)

"With the sale of our CEE assets, we take an important step in simplifying and focusing Telenor's portfolio on the regions where we see the strongest potential for value creation," noted CEO Sigve Brekke in an official statement about the sale. "Following this transaction, Telenor's footprint will consist of integrated fixed and mobile operations in Scandinavia, and strong mobile positions in Asia. Telenor is confident that PPF Group's experience in both the region and sector will make it a good owner of the CEE assets," added Brekke.

CEE You Later
Telenor CEO Sigve Brekke: 'With the sale of our CEE assets, we take an important step in simplifying and focusing Telenor's portfolio on the regions where we see the strongest potential for value creation.'
Telenor CEO Sigve Brekke: "With the sale of our CEE assets, we take an important step in simplifying and focusing Telenor's portfolio on the regions where we see the strongest potential for value creation."

Telenor's investors aren't exactly pumped by the move, despite the operator's suggestion that the sale proceeds could fund a special dividend of 4.4 Norwegian kroner ($0.57) per share: Telenor's stock was up just 0.8% on the Oslo exchange Wednesday to NOK174.75.

Once the sale is completed, which is expected in June this year, Telenor Group (Nasdaq: TELN) will be active in Norway, Denmark, Sweden, Bangladesh, Malaysia, Myanmar, Pakistan and Thailand: Those markets will be the focus for its ongoing efforts to achieve greater efficiency in its operations as it looks to enhance its profitability. (See Downsizing Telenor Pins Margin Hopes on Automation.)

Telenor isn't the only Scandinavian operator to have decided that eastern Europe is a distraction: Swedish operator Telia has also been offloading its Eurasian assets to focus on Scandinavia and the Baltics. (See Telia Flogs Georgia Biz, Cuts More Jobs and Telia Sells Stake in Azercell.)

PPF, meanwhile, is building a regional communications services empire (as well as holding assets in banking, real estate, mining and other sectors). It already owns a majority stake in O2 Czech Republic, the country's largest service provider, and wholly owns CETIN, a national wholesale data network operator in the same country. It also owns Nova Broadcasting Group in Bulgaria.

"With this purchase, PPF Group is expanding its telecommunications portfolio to four more countries, and fulfilling our long-held goal to become a mid-sized European operator and to use our experience to strengthen our market position," noted Ladislav Bartonícek, PPF Group's shareholder responsible for its telecoms assets, in an official statement.

— Ray Le Maistre, Editor-in-Chief, Light Reading

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