Magyar Telecom, the Hungarian alternative telco operating under the Invitel brand, has launched a strategic review. TelecomFinance understands that all options are being considered, and that possible scenarios include a merger with another player.
The…
Magyar Telecom, the Hungarian alternative telco operating under the Invitel brand, has launched a strategic review. TelecomFinance understands that all options are being considered, and that possible scenarios include a merger with another player.
The highly leveraged company, which is owned by private equity firm Mid Europa Partners, today launched a process to identify noteholders in order to get their input on the process.
Magyar Telecom said it has hired Houlihan Lokey as financial adviser and White & Case as legal adviser to undertake “a strategic review of the group’s capital structure in light of new tax legislation and the weak Hungarian macroeconomic environment”.
While a merger is seen as one potential outcome of the review, other measures to get access to fresh capital will also be considered, depending on the outcome of discussions with noteholders.
According to the company statement the review “will be focused on the group’s balance sheet and is not intended to impact the group’s employees, partners, suppliers or trade creditors”.
The European Commission has long criticised Hungary for its special tax regime on telecoms operators. Last year, Brussels launched proceedings at the European court of justice against Hungary, arguing the tax of up to 6.5% on the turnover of telecoms is illegal under EU telecoms rules. The commission has also challenged a new tax levied on telephone calls and text messages.
Norbert Balint, an associate at law firm Wolf Theiss in Budapest, said that, in the current climate, it is “only natural that … businesses attempt to optimise their operations and conduct a review of their assets and activities”.
“Such a process usually involves a comprehensive review from both the financial and the legal perspective to evaluate all aspects of their activities and is aimed to identify new possibilities that could help companies manage or mitigate unfavourable external effects,” he said.
In Balint’s view, such evaluations are generally bad omens in that they show companies are unable to generate the expected level of return and need to tighten their belts.
Coversely, if they are successful, he said “these reviews can propose new structures, creative ideas and efficiency gains seem to provide the best possibilities to manage the effects of the crisis, the taxes and the unpredictability.”
For the end of Q3 2012, Magyar reported nine-months revenues of €127.4m, down 14% compared to the same period in the previous year. At the end of Q3, the company had €316.5m of long term debt and €52.1m in current liabilities.
Mid Europa Partner most recently sold its stake in Orange Austria to Hutchison.
