Swedish telecoms firm Tele2 said on Tuesday it was buying the local subsidiary of rival TDC (TDC.CO) for 2.9 billion Swedish crowns ($352 million) to strengthen its position in the business telecoms market.
Tele2 said that while the deal was not conditional on equity financing, the company would carry out a preferential rights issue to existing shareholders totaling about 3 billion Swedish crowns to maintain its financial strength.
"This deal is a unique opportunity for Tele2 to build scale and expand its range of services in the B2B (business-to-business) market," Tele2 Chief Executive Allison Kirkby said in a statement.
Tele2 estimates that operating cost and capital expenditure synergies will amount to approximately 300 million Swedish crowns each year, with additional one-off capital cost savings of 200 million. It also expects positive effects of cross-selling.
TDC said the sale would lead to a capital gain of about 800 million Danish crowns ($122 million) and completed a strategic review of the Danish telecom operator's business announced earlier this year.
In connection with the sale, TDC cut its full-year forecast for earnings before interest, tax, depreciation and amortization to 8.4 billion Danish crowns from 8.8 billion and its equity free cash flow estimate to 1.7 billion from 1.9 billion.
TDC intends to use part of the proceeds to reduce net debt and might spend part on strengthening its Danish or Norwegian businesses, it said.
"TDC has been under enormous pressure with their debt, so they've been very limited in terms of being able to invest to create growth in the Danish business," said Michael Friis Jorgensen, chief analyst at Alm. Brand Markets.
Denmark's biggest telecoms firm cut dividends and lowered its financial forecasts in January while launching a three-year strategy in an effort to revive growth.
The sale, subject to approval by European regulators, is expected to complete in the fourth quarter of 2016. The Swedish unit accounted for 11 percent of TDC's total revenue.
Source : reuters.com