Biggest Danish Phone Company Drops M&A as Creditors Come First

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TDC A/S, which last year unnerved both bond and share investors with a $2 billion takeover, won’t enter any new deals as preserving credit ratings becomes its priority.

That’s according to Pernille Erenbjerg, who took over as chief executive officer on Friday, replacing Carsten Dilling after three years of disappointing returns.

“I don’t have any plans for acquisitions, either in the short or in the medium term,” Erenbjerg said in a phone interview. “It’s always difficult to comment on what might happen in the long term, so I can’t do that.”

TDC’s bonds and shares fell in September when the Copenhagen-based company bought Norwegian cable provider Get AS for 13.8 billion Norwegian kroner. The takeover forced TDC to cut its dividend payment ratio and prompted Moody’s Investors Service to downgrade it to Baa3, one step above junk.

“We want to be investment grade and it’s very important for me that we stick to the rating -- we’re very committed to that,” Erenbjerg said. “It’s too soon for me to comment on our long-term dividend policy.”

Increasing Competition

The 47 year-old, who is the only woman to head one of the 19 companies in Denmark’s benchmark stock index, says she needs to focus on the hurdles TDC faces with its existing setup rather than buy new assets. TDC has struggled under increasing competition in the Nordic mobile-phone market and from tougher regulation.

The yield on TDC’s 1.75 percent 800 million-euro ($890 million) bond due 2027 fell 4 basis points to 2.44 percent as of 9:26 a.m. in Copenhagen. TDC’s shares declined 0.5 percent to 44.38 kroner.

The company had net interesting-bearing debt of 27.3 billion kroner ($4.09 billion) last quarter, up from 21 billion kroner a year earlier. Its 3.75 percent 500 million-euro ($560 million) bond due 2022 has returned investors about 0.3 percent this year, compared with a 1.5 percent loss for shareholders, when including dividends.

“There’s not a lot of space under our current credit rating,” Erenbjerg said. “So if we at some point were to make a large acquisition -- which I must underline is very unlikely - - it wouldn’t be debt-financed, but something we would need to discuss with our shareholders.”