Mobile services

Telia to Raise $706M From Yoigo Sale

Sweden's Telia Company will raise €479 million ($706 million) from selling its majority stake in Spanish mobile operator Yoigo to local rival Masmovil as part of its strategy to focus on core operations in the Nordic and Baltic regions.

The sale will end Telia Company 's long involvement in the Spanish market and comes as Yoigo struggles to compete against bigger rivals offering bundles of fixed and mobile services, including former state-owned monopoly Telefónica .

Fomerly known as TeliaSonera, Telia has been rolling back the empire it built during the heyday of mobile telecom. In September last year, the operator announced plans to quit its various Eurasian markets and channel more resources into its businesses in northern Europe. (See Telia Lifts Outlook After Earnings Boost, TeliaSonera: Timing May be 'Wrong' for Eurasia Sale and TeliaSonera to Quit Eurasia, Focus on Europe.)

In December, it sold its majority stake in Nepal's Ncell to Asia's Axiata Group Berhad and it is currently in talks with players including Turkcell Iletisim Hizmetleri A.S. (NYSE: TKC) about a divestment of other Eurasian assets.

Highlighting Telia's desire to concentrate on the Nordics and Baltics, the operator also today announced an offer to buy a Finnish fiber network operator called Anvia, which provides services in western Finland. The terms of that deal were not disclosed.

The sale of the 76.6% stake in Yoigo values the company at €625 million ($921 million), or about 8.1 times its EBITDA last year, according to Telia's accounting principles.

In a company statement, Telia said the move would generate a capital gain of more than SEK4 billion ($486 million) and reduce its net debt by approximately SEK6 billion ($729 million).

Net debt totaled SEK54.6 billion ($6.63 billion) at the end of March, or 1.53 times EBITDA in 2015. Following a deal with Masmovil, the net-debt-to-EBITDA ratio would fall to just 1.36 -- a low number by comparison with many of Telia's European peers.

"The divestment of Yoigo is an important milestone in our ambition to increase focus on our operations in the Nordics and Baltics," said Johan Dennelind, Telia's CEO, in a statement.

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Masmovil currently provides fixed and mobile services in Spain and claims to serve about a million residential customers and 26,000 enterprises.

The company has been linked with a possible takeover of Yoigo since this time last year and said the acquisition would strengthen its position as a "fourth national telecommunications operator in Spain." It has agreed to buy the remaining 23.4% stake in Yoigo from minority shareholders, who are entitled to a break-up fee of €30 million ($34 million) if the deal falls through.

A takeover would follow last year's acquisition of fixed-line assets that regulatory authorities forced Orange Spain to sell before allowing it to buy cable operator Jazztel plc . Masmovil has provided mobile services through wholesale arrangements with Orange -- bulking up its mobile virtual network operator (MVNO) business with the acquisition of another MVNO called Pepephone in April -- but the Yoigo move will allow it to sever these ties and control its own mobile infrastructure.

The company believes the combination of its existing assets with Yoigo's mobile network will enable it to challenge Telefónica, Orange Spain and Vodafone España S.A. in the market for so-called converged services.

With just 3.3 million mobile subscribers, and sales of about SEK8 billion ($972 million) last year, Yoigo controls just 7% of the Spanish mobile market. But its network covers about 85% of the population and relies on spectrum in the 1.8GHz and 2.1GHz bands, which are widely used in other parts of the world.

A combination of the two operators in 2015 would have generated €1.07 billion ($1.21 billion) in revenues and €108 million ($122 million) in EBITDA, said Masmovil, which plans to fund the takeover through a mixture of debt (accounting for 60% of the total) and equity (40%).

Masmovil reckons cost savings resulting from the merger could reach more than €60 million ($68 million) by 2019.

The deal is subject to the approval of Spanish competition authorities but Telia expects to complete the transaction during the third quarter of this year.

Telia's share price closed up 2.5% in Stockholm on Monday in anticipation of a deal with Masmovil. The stock is currently trading down about 0.3% today.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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