Telenor ASA, which agreed to buy Hellenic Telecommunications Organization SA’s Bulgarian mobile unit for 717 million euros ($938 million), said Bulgaria’s lower level of debt and smartphone penetration make the country an ideal market to continue its global expansion.
“Bulgaria has a significantly lower debt than in countries surrounding it, which gives a bit more fiscal headroom,” Kjell-Morten Johnsen, head of Telenor’s European operations, said on a conference call today. “We have exposure to several of these markets from before. We’ve been through a lot of change in that region and have landed on our feet in a very good way.”
The acquisition of Globul, the second-largest mobile carrier in Bulgaria with a 36 percent share of the market, allows Fornebu, Norway-based Telenor to expand in central and eastern Europe while enabling Athens-based Hellenic to reduce costs. Germany’s Deutsche Telekom AG, which holds a 40 percent stake in Hellenic, also known as OTE, considered aiding the unit in August. The deal will be completed in the third quarter.
Telenor, the Nordic region’s largest telecommunications operator, generated 58 percent of its revenue outside Norway, Sweden and Denmark last year and has continued to push into faster-growing countries in Europe and Asia to boost sales. The carrier already operates in Hungary, Serbia, Montenegro as well as Thailand and Malaysia.
Telenor shares fell 0.5 percent to 129.3 kroner at 3:01 p.m. in Oslo, bringing the advance this year to 15 percent. OTE climbed 1.4 percent to 6.52 euros in Athens.
By selling for 6.8 times the unit’s estimated 2013 earnings before interest, taxes, depreciation and amortization, “it looks as though OTE has got the right side of this transaction, with Telenor paying a pretty full price for an asset with declining Ebitda in a region with problematic macro-economic conditions,” Espirito Santo said in a note to clients today.
OTE, Greece’s second-biggest company by market value, has cut jobs and sold international assets to reduce debt as the nation’s recession damps demand for its products. In January, the company issued 700 million euros of five-year bonds to redeem more than 1 billion euros of notes due this year and next. Demand for those notes exceeded supply, with OTE Chief Executive Officer Michael Tsamaz calling it a “vote of confidence” in the company.
Globul has been in Bulgaria since 2001, Telenor said. At the end of 2012, the carrier had 4.5 million subscribers. The company, along with OTE’s Germanos Bulgaria unit, had revenue of 378 million euros and earnings before interest, taxes, depreciation and amortization of 135 million euros.
Bulgaria has a relatively low level of smartphone penetration and mobile data use, which makes the country an ideal candidate for growth, Johnsen said on the call.
“We’re confident Bulgaria is similar to what we have experienced and fits our way of working,” he said.
OTE reported a fourth-quarter net loss of 43.7 million euros on Feb. 28 as sales slipped to 1.1 billion euros from 1.2 billion euros a year earlier. OTE is scheduled to report its first-quarter results May 8. Telenor reported April 26 first-quarter sales slipped 1.6 percent to 24.7 billion kroner ($4.22 billion), while net income rose to 3.6 billion kroner.