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TeliaSonera’s Orange Denmark acquisition creates new contender in Danish market

8 Jul 2004

Nordic telecoms giant TeliaSonera has agreed to acquire Orange Denmark from France Télécom/Orange for an enterprise value of EUR600 million (less the net debt of the mobile subsidiary on the closing date of the transaction), creating a new powerful player in the Danish wireless market. The long anticipated deal will make TeliaSonera the third largest mobile operator in Denmark, helping generate new revenue streams to offset declines in its traditional Nordic/Baltic markets. At the end of June Orange Denmark had around 605,000 mobile subscribers, whilst Telia Mobile Denmark had 556,000. TeliaSonera hopes that the combined entity will be much better placed to challenge the market dominance of TDC Mobil and Sonofon, which at the start of April this year boasted 2.42 million and a million subscribers respectively. TeliaSonera says the acquisition will generate cost synergies of around SEK490 million from 2006, SEK20 million of which will be capital expenditure savings and SEK470 million related to closing down one of the overlapping GSM networks, making the new enlarged company much more competitive. The transaction is now subject to all necessary legal and governmental authorisations, but is expected to be completed before the end of October 2004 – with the proceeds payable in cash. The Orange board of directors and France Télécom’s (FT’s) strategic committee are understood to have backed the deal, which will now be presented before the FT board for final ratification.

TeliaSonera’s decision to buy the Danish cellco marks a sea change in thinking that could end high level disagreements over the strategic focus of the company. The TeliaSonera merger has come under increasing tension since the Swedish and Finnish heavyweights joined up in 2002. Cracks soon emerged and nationalistic bickering between the two, centred on the controversial dismissal of the Finnish deputy chief executive Harri Koponen in June this year, has masked deeper problems concerning the group’s future. TeliaSonera’s turnover has been dropping in the face of stiff competition but, despite its resources and publicly stated intentions, it has singularly failed to expand through acquisitions. With the telco’s stock failing to perform Koponen was asked to leave on the grounds that there was a lack of cohesion on management principles, although Koponen claimed that in fact he was ‘sacked’. The former deputy CEO was understood to be pro-expansionist, but his former superior Mr Igel was more cautious and wary of overpaying for assets. Frustratingly, at the time of Koponen’s dismissal, analysts noted that the company would be debt free by the end of 2004 and had funding to the tune of USD8 billion available.

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