Sweden’s TeliaSonera and Norway’s Telenor have agreed to combine their mobile operations in Denmark and create a joint venture.
The transaction will take the number of operators in the Danish mobile market, viewed as the most competitive in the…
Sweden’s TeliaSonera and Norway’s Telenor have agreed to combine their mobile operations in Denmark and create a joint venture.
The transaction will take the number of operators in the Danish mobile market, viewed as the most competitive in the Nordics, down from four to three.
The new venture is an extension of the telco’s existing network sharing agreement and will have roughly 3.5 million subscribers, capturing 40% of the mobile market.
In its most recent quarterly results, incumbent TDC estimated it had 41% of Denmark’s mobile market. The smallest network operator is Hutchison, which said it had a total of just over one million Danish customers as of 30 June 2014.
The transaction requires approval from the European Commission (EC). TeliaSonera and Telenor have left the door open for a long regulatory process, saying only that they expect to close the deal sometime in 2015.
Earlier this week, TeliaSonera’s attempt to consolidate the Norwegian market by acquiring Tele2’s local assets hit a regulatory hurdle after the country’s competition authority issued a statement of objections.
However, the EC does not oversee Norway and its telecoms market is very different from Denmark’s.
TeliaSonera and Telenor will own the Danish JV equally as the enterprise value of their respective units are broadly the same.
The new company will have revenues of more than DKr9bn (US$1.49bn) and plans to achieve DKr800m (US$133m) in annual synergies, according to a joint statement from the two operators.
“Competition in Denmark is intense and we face continued pressure on revenue growth and profitability, making consolidation inevitable,” Kjell Morten Johnsen, head of Telenor’s European operations, said in the statement.
“By combining the assets and customer bases of Telenor and TeliaSonera in Denmark, the joint venture will become a robust operator.”
The companies have now begun searching for a CEO to lead the new operator. Its board will be composed of three directors each from TeliaSonera and Telenor, plus a chairman appointed together by the parties.
One key industry source told TelecomFinance a month ago that the market was crying out for consolidation and that all the operators needed the benefits of market repair in terms of pricing, which a four-to-three merger would bring.
The person argued that the creation of another larger, more powerful operator was preferable to the current state of affairs.
However, what the market will look like after the merger closes, providing it is approved, remains to be seen as the regulator could impose significant remedies.
In other European markets the EC has looked to balance consolidation by strengthening the position of MVNOs in the market to increase consumer choice. They have done this by asking merging operators to guarantee the virtual telcos capacity on their networks.
