Sweden's Telia Company is selling its international carrier business to Swedish pension funds for 9.45 billion Swedish kronor (US$1.1 billion), as part of efforts to streamline its operations and strengthen its financial base.
Allison Kirkby, president and CEO of Telia, confirmed that the majority of the proceeds from the sale of Telia Carrier to the Polhem Infra unit "will be used to strengthen our balance sheet and thereby provide a solid financial base for Telia Company and our shareholders."
Kirkby said that the operator "can now fully concentrate on our Nordic and Baltic footprint."
Telia has also reinstated its full dividend for 2019, now paying the SEK2.45 ($0.27) per share that was originally proposed in January instead of SEK1.80 ($0.20). It adjusted the dividend downward in March, due to the effects of the pandemic.
The operator has formed a long-term strategic partnership with Telia Carrier in order to ensure business as usual for its international customers. It claimed that the change of ownership will enable Telia Carrier, with its 530 employees, "to drive a level of investment in network development, services and customer care programs that brings benefits to content providers, operators and enterprises beyond that of any competitor."
Telia Carrier's network spans across Europe, North America and Asia, connecting customers in more than 120 countries. It noted that its Scandinavian footprint is particularly strong because of the so-called Scandinavian Ring – the part of Telia Carrier's network that connects major Baltic and Nordic cities.
The transaction is expected to generate a capital gain of about SEK7 billion ($790 million) at closing, providing a nice boost to Telia's bottom line. The transaction is subject to regulatory approvals and is expected to be completed during the first half of 2021.
The operator is also in the process of divesting its 47.1% holding in Turkcell Holding to state-owned Turkey Wealth Fund (TWF) for $530 million.
The Swedish operator has been suffering from the economic impact of the COVID-19 pandemic, reporting an estimated SEK1 billion ($112 million) impact on service revenue and SEK500 million ($56 million) on EBITDA in the second quarter of this year.
The proceeds will only make a small dent in its net debt, which stood at SEK83.79 billion ($9.4 billion) at the end of the second quarter.
The acquisition is Polhem Infra's first investment in this field. The company is jointly owned by the Swedish pension funds First AP Fund, Third AP Fund and Fourth AP Fund.
Kirkby has been CEO since early May, but has already been making her mark. As well as streamlining the Nordic telco's operators, she has also assembled a new-look management team.
According to Reuters, Telia shares have gained around 13% since Kirkby joined the operator, and were up 4.5% when markets opened today. Jefferies said the sale of Telia Carrier appeared supportive and highlighted the use of almost 30% of the proceeds to top up the dividend.
"This is a welcome first move of the new, highly respected CEO," the investment bank said in a note, Reuters reported.
- Telia sees $110M impact on Q2 revenue from COVID-19
- Telia new broom makes sweeping management changes
- Telia gets out of Turkcell
— Anne Morris, contributing editor, special to Light Reading