Telenor to Sell Central, East Europe Units for $3.4 Billion

(Bloomberg) -- Telenor ASA agreed to sell its businesses in central and eastern Europe to Czech billionaire Petr Kellner’s investment firm PPF Group for 2.8 billion euros ($3.4 billion) as the Norwegian phone company focuses on markets in Asia and Scandinavia.

Telenor will share some of the proceeds with its shareholders, the Fornebu, Norway-based company said in a statement. The sale includes Telenor’s mobile operations in Hungary, Bulgaria, Montenegro and Serbia and the technology service provider Telenor Common Operation. The businesses contributed about 9 percent of Telenor’s revenues and 8 percent of profit last year, the company said.

Headed by Chief Executive Officer Sigve Brekke, Telenor has sold its online classifieds operations in Latin America, reduced its stake in operator Veon Ltd. and exited India, in efforts to streamline its portfolio and free up resources for investments in growth markets such as Thailand and Bangladesh. The company has also used buybacks and dividends to send cash back to investors, and plans to pay a special dividend of 4.40 kroner a share after the divestment announced Wednesday.

“Following this transaction, Telenor’s footprint will consist of integrated fixed and mobile operations in Scandinavia, and strong mobile positions in Asia,” Brekke said in the statement. “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 began considering a sale of the businesses two months ago, when it said it had received takeover interest for the units. While the deal values them about 14 percent lower than consensus estimates, the strategic rationale for the divestment is “sound,” JP Morgan analyst Roman Arbuzov said in a note.

Growing Regions

“The sale will allow Telenor to focus more on its growth regions and also to continue to drive its digitalization agenda,” Arbuzov said. “The transaction also highlights Telenor’s increasing focus on returns and not just growth.”

Telenor shares gained 0.8 percent to 174.75 kroner at 12:48 p.m. in Oslo.

The Norwegian company’s divestment follows a flurry of deal activity in the Scandinavian telecom sector. Swedish operator Tele2 AB, which sold holdings in Austria and the Netherlands last year, plans to merge with cable operator Com Hem Holding AB, and Denmark’s incumbent carrier TDC A/S abandoned a bid for media assets of Modern Times Group AB of Sweden and agreed to a takeover offer from a group led by pension funds.

The Telenor board will ask shareholders at the annual meeting on May 2 to approve the special dividend if the sale goes through. Including the proposed ordinary dividend of 8.10 kroner a share for 2017, the total proposed pay-out to shareholders in 2018 will be about 19 billion kroner, the company said. The company also has said it plans to ask shareholders for a new share-buyback mandate.

PPF is the largest private investment group in central and eastern Europe, with about 35 billion euros of assets as of June 2017. In 2014, it entered the telecom sector by buying the largest operator in the Czech Republic from Telefonica SA for about $3.4 billion.

To contact the reporters on this story: Phil Serafino in Paris at pserafino@bloomberg.net, Niclas Rolander in Stockholm at nrolander@bloomberg.net.

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net, Rebecca Penty, Phil Serafino

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