TDC Ready for Mergers as Nordic Industry Consolidates

TDC A/S (TDC) says it’s ready to consider an offer as the Nordic telecommunications industry heads into a wave of tie-ups that will absorb a number of mid-sized companies.

“Consolidation is a big theme in Europe for our industry,” Pernille Erenbjerg, the chief financial officer of Denmark’s biggest phone operator, said today in a phone interview. “Looking at a five-year horizon, I would say that consolidation will also take place in the Nordic region, leaving fewer players.”

TDC is struggling with declining revenue amid tough competition in the Nordic mobile-phone market. The Copenhagen-based company’s shares plunged 8.9 percent yesterday, the most in five years, after it said tougher regulation on roaming and broadband wholesale prices will increasingly hurt sales and earnings from next year.

The Scandinavian market is dominated by Fornebu, Norway-based Telenor ASA (TEL) and Stockholm-based TeliaSonera AB. (TLSN) TDC ranks in the next group together with Tele2 AB (TEL2B) and 3 Scandinavia, both based in Stockholm. The latter is owned by billionaire Li Ka-Shing’s Hutchison Whampoa Ltd. (13)

“I don’t foresee the biggest companies like Telia and Telenor disappearing over five years, but others might,” Erenbjerg, 46, said. “TDC’s role is different than these two bigger players. TDC has a size that makes it possible for big players to consider it.”

European Mergers

TDC shares traded 2.5 percent lower at 50.05 kroner as of 1:31 p.m. in Copenhagen, erasing earlier losses of as much as 5.5 percent.

To counter a fall in revenue, phone and cable carriers across Europe are pursuing a series of mergers and acquisitions. Telefonica SA (TEF) on July 2 got clearance for its 8.55 billion-euro ($11.4 billion) acquisition of Royal KPN (KPN) NV’s E-Plus unit in Germany, a regulatory decision that may provide impetus for a new round of deals. TeliaSonera plans to buy Tele2’s Norwegian business to bolster its No. 2 mobile position, the carrier said July 7.

TDC agreed in April to sell its Finnish unit for 154 million euros to DNA Oy. TDC doesn’t plan more divestments because “the rest of what we have is what we consider core,” the CFO said. The company may make smaller acquisitions, in the amount of about 100 million kroner ($18 million) each, she said.

Public Contracts

“But we’ll only do that if we find something we really want in our target nations of Denmark, Norway and Sweden,” Erenbjerg said.

TDC’s gross profit will suffer by as much as 150 million kroner from tougher regulation this year. That effect will be as big as 175 million kroner in 2015 and 250 million kroner the year after, the company said yesterday. It also said it lost two public contracts to low-price competitors.

“We’re not actively up for sale, although as a listed company, you’re theoretically always for sale,” Erenbjerg said. “But we would obviously listen if there were an approach.”

To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brogger at tbrogger@bloomberg.net Kim McLaughlin

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