It has been years in the making, but as DNA’s sale finally kicks off bankers are confident of a deal for Finland’s number three telco before the end of 2013.
“In Finland when we say we will make a deal we usually do,” noted a banker close to the…
It has been years in the making, but as DNA’s sale finally kicks off bankers are confident of a deal for Finland’s number three telco before the end of 2013.
“In Finland when we say we will make a deal we usually do,” noted a banker close to the situation, who said first round bids are due in June.
UBS, DNA’s lead financial adviser, is understood to have already put together a €1bn staple financing package to alleviate any funding concerns. That represents five times the company’s 2012 EBITDA of €191m.
The operator will likely attract institutional investors such as EQT, Nordic Capital, BC Partners and Cinven, because of a somewhat limited appeal for strategic players. According to Danske Bank analyst Panu Laitinmaki, even acquisitive Scandinavian players like Telenor and Tele2 would probably only be interested at a discount that DNA’s owners are unlikely to accept.
“Finland is a mature market with limited growth opportunities and there are no big cross-border synergies in telecom operator mergers as far as I know,” he said.
Laitinmaki believes an IPO is more likely. DNA’s owners – former regional telcos that became holding companies– have been openly talking about a listing for nearly five years.
But after IPOs of operators such as Telefonica’s O2 Germany last year it could finally be the right time to hit the market.
“On top of equity markets looking positive, I’d say DNA’s prospects operationally are better than 1-2 years ago,” said Laitinmaki.
“DNA has managed to get sufficient scale in the Finnish market to be profitable and in Q1 it outperformed its larger peers by reporting flat sales and clearly higher EBITDA – previous restructurings helped. It could be an interesting challenger story in a market which is – with the exception of the price war in the past 2-3 quarters that was pushed by TeliaSonera – seen as a low-risk, advanced market.”
He pointed to how the country’s lagging smartphone penetration also indicates growth potential in mobile data. Finland is the land of Nokia, and many people have been slow to switch to smartphones because for a long time the Finnish vendor did not offer anything competitive.
However, one banker advising a potential bidder cautioned that there was more than meets the eye when it came to evaluating DNA.
The company is also partly a cable operator, and fixed assets are usually subject to far higher valuations compared with their mobile-only counterparts. Even still, unlike most of the rest of the world, free TV in Finland is very strong, with many people reluctant to pay for their content.
“Revenue streams for cable in Finland are very low, so on a face value it looks very interesting but when you dive down to it there’s a lot of question marks about how the market actually is,” the source said.
“It’s usually something that would drive value but in Finland it’s very different.”
Finda Oy is DNA’s largest shareholder and had a 32.56% stake at the end of 2012. Jarmo Leino, Finda Oy’s CEO and chairman of DNA, declined to comment on the speculation.
He reaffirmed that the company is open to all financing options, including a sale or IPO.
