Tele2 Buys TDC Sweden for $352 Million to Expand Business Unit

Tele2 AB, a Stockholm-based phone carrier, is buying TDC A/S’s Swedish unit to strengthen its sales to businesses and expand beyond the sluggish consumer mobile market.

TDC Sweden, being sold for an enterprise value of 2.9 billion kronor ($352 million), serves public entities and corporate customers. The unit had sales of 3.4 billion kronor in 2015 and an earnings before interest, taxes, depreciation and amortization of 400 million kronor. Tele2 plans to sell shares for about 3 billion kronor as part of the purchase, it said in a statement Tuesday. The deal is expected to close by the fourth quarter.

Tele2 said TDC Sweden will give it scale and help the company meet the needs of large business-to-business customers demanding a wider range of communication and network services. The carrier estimates annualized savings for operating and capital expenses of about 300 million kronor, and a one-time capital spending savings of about 200 million kronor. Integration costs will be about 750 million kronor.

“This deal is a unique opportunity for Tele2 to build scale and expand its range of services in the B2B market, it is hugely complementary to our existing Swedish business, and it allows us to meet the global trend of large B2B customers demanding a wider range of communication & network services,” Tele2 Chief Executive Officer Allison Kirkby said in the statement.

The divestment will give TDC a gain of about 800 million kroner ($122 million) after tax, the carrier said in its statement. Proceeds will be used to reduce TDC’s debt and strengthen its Danish and Norwegian businesses.

Tele2’s Swedish sales fell 2 percent in the first quarter, while TDC’s Swedish business saw its revenue gain 5.5 percent.

Tele2 has slumped 16 percent this year, valuing the carrier at 32 billion kronor, while TDC has slipped 9.3 percent for a market value of 25 billion kroner.

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