Telia puts pressure on Telenor with $2.6 billion Norwegian expansion

By Johannes Hellstrom and Olof Swahnberg

STOCKHOLM (Reuters) - Swedish telecom operator Telia Company has agreed to buy TDC's Norwegian business in a $2.6 billion deal that adds broadband and TV to its mobile services in Norway and puts pressure on market leader Telenor.

Telia's Norwegian purchase will give it a full range of mobile, fixed-line and TV operations in all of its seven Nordic and Baltic markets, although its business in Denmark remains too small to be sufficiently profitable.

Rapid change in the global telecoms and media sectors as players look to pool services to drive revenue growth is reshaping the Nordic market with Sweden's Tele2 making a $3.2 billion bid for cable-TV firm Com Hem this year.

The acquisition by Telia, which has long said purchases of broadband and cable-TV assets in Norway were a priority, values the TDC business at 21 billion Norwegian crowns, or 12 times 2017 core earnings.

Telia has previously eyed a potential merger with TDC but opted against it due to expected anti-trust challenges, sources told Reuters earlier this year.

The Swedish company said its share repurchases and dividend policy would be unaffected by the deal, but its shares were down 3.7 percent by 1300 GMT. Telenor shares also fell 4 percent amid concerns over price competition in its home market.

TDC's sale of its Norwegian business - fibre and TV supplier GET and business to business provider TDC Norway - comes after its new owners delisted the firm and opted to pursue investments in Danish infrastructure and digital services.

A consortium led by Australia's Macquarie bought Denmark's for $6.7 billion this year.

"GET and TDC Norway are high quality businesses, but it has become clear that we do not need to own these businesses in order for us to succeed with what is essentially an ambition focused on Denmark," TDC CEO Pernille Erenbjerg said.

TDC has no plans for further divestments, a spokeswoman said. Denmark and networks are the two remaining businesses.

ROOM FOR MORE

Telia's Chief Executive Johan Dennelind told Reuters that the Swedish company, which still is in talks to buy Bonnier Broadcasting, had room for further acquisitions.

"It will create a leading convergent operator for both consumers and enterprises in Norway which can compete in the market with a lot of attractive and new products and services," Dennelind said in a statement.

In 2017 GET and TDC Norway reported revenues of 4 billion Norwegian crowns and EBITDA (earnings before interest, taxes, depreciation and amortization) of 1.7 billion crowns.

Telia said it expected the deal to generate 600 million Norwegian crowns of synergies by 2021 while integration costs were seen at about 200 million annually during 2019 and 2020.

Its existing Telia Norway business has 2.3 million mobile subscriptions where it operates under brand names Telia, OneCall, MyCall and Phonero. ($1 = 8.0859 Norwegian crowns)

(Reporting by Johannes Hellstrom and Olof Swahnberg, additional reporting by Helena Soderpalm Stine Jacobsen and Gwladys Fouche; Editing by Kirsten Donovan/Keith Weir)