DNA Oy is weighing a 2013 sale or initial public offering, said three people with knowledge of the matter, as Finland’s third-largest wireless carrier’s owners review options for the company valued at about $1.4 billion.
DNA is owned by a group of Finnish regional phone carriers led by Finda Oy, which are working with UBS AG (UBSN) (UBSN) to study the sale of a controlling interest to an outside investor or an IPO in Helsinki this year, said one of the people, asking not to be named as the deliberations are private. An IPO may raise as much as 500 million euros ($648 million), the people said.
A sale would provide the shareholders with cash, while potentially strengthening DNA against larger rivals Elisa Oyj (ELI1V) and TeliaSonera AB. The share sale could be the biggest in Finland, home of Nokia Oyj (NOK1V) and “Angry Birds” maker Rovio Entertainment Oy, since 2005.
“I would expect DNA to IPO about half of its shares to the wider public and to institutional investors,” said Mikko Ervasti, an analyst at Evli Bank Oyj in Helsinki. “There should be relatively broad appeal.”
DNA’s market value is probably about 1.1 billion euros, Ervasti said. Though the company’s profitability has trailed rivals, it will probably boost margins this year and next as it adds subscribers and curbs costs, according to the analyst.
“We are evaluating our options and are preparing the company for an IPO as we have done for years,” said Irene Kantor, a spokeswoman for DNA in Finland. She declined to comment on potential advisers or timing. A spokeswoman for UBS declined to comment.
DNA’s sales increased 5.7 percent to 769 million euros last year and earnings before interest, taxes, depreciation and amortization rose 1.2 percent to 191 million euros, according to its website. DNA’s wireless service covers more than 5 million Finns and the company also owns a cable-television network in the Helsinki area.
DNA has grown steadily, taking market share from its bigger rivals since it was established as the regional carriers’ joint wireless operator in 1999. The Helsinki-based company had almost 2.5 million wireless subscriptions at the end of last year. It has about 1,400 workers.
“The telco space in Finland is pretty intense with DNA, Elisa and TeliaSonera fighting in most of the regions,” Ervasti said. “You have to campaign heavily to keep subscribers.”
The companies are among European mobile carriers competing intensely on price as the growth of smartphone use plateaus. Elsewhere, operators including France Telecom SA and Vodafone Group Plc are slashing prices in markets such as Spain and the U.K. to woo customers.
Elisa, Finland’s biggest mobile carrier, has an enterprise value of 2.3 times annual sales and 7.3 times Ebitda, according to data compiled by Bloomberg. On that basis, DNA’s enterprise value is about 1.4 billion euros to 1.8 billion euros. The company had 258 million euros of net debt at the end of 2012.
Rovio, the Espoo, Finland-based maker of the “Angry Birds” games for mobile phones, tablets and computers, has also signaled it is considering an IPO. Henri Holm, Rovio’s senior vice president for Asia, told Bloomberg last year the company is working toward an IPO and hasn’t decided the location.
DNA’s listing would be welcomed by Nasdaq OMX Helsinki Oy, which has pleaded with companies to list their shares on Finland’s main exchange and end a drought in local IPOs. There have been just two new entrants to Helsinki’s main list in the past two years. That compares with a total of 53 entrants during the information technology boom of 1999 and 2000.
Recent listings on the Helsinki bourse include Finnish bank Aktia Oyj in 2009, and builder SRV Oyj, which sold shares in 2007 to help fund expansion into Russia. Paint maker Tikkurila Oyj was spun off from chemicals producer Kemira Oyj in 2010.
Meanwhile, builder YIT Oyj is spinning off its maintenance unit into Caverion Oyj, which it plans to list this year.
At 500 million euros, DNA’s IPO would be the biggest in Helsinki since Neste Oil Oyj (NES1V) raised 576.6 million euros in 2005, when it was spun off from utility Fortum Oyj.