bne IntelliNews – 4iG and the Hungarian State buy the local unit of Vodafone for 1.8 billion euros

UK-based global telecommunications giant Vodafone Group has agreed to sell its Hungarian subsidiary to BSE-listed ITC 4iG and state-owned Corvinus for HUF 715 billion in cash ($1.8 billion euros), under a non-binding agreement.

The transaction, which is expected to close by the end of 2022, subject to due diligence and regulatory approval, will give 4iG 51% of Vodafone Magyarorszag and the state a 49% stake.

“The combination of 4iG and Vodafone is an important step towards creating a Hungarian national champion in the ICT sector,” 4iG said in a statement.

Chief Executive Officer Gellert Jaszai said the acquisition could be the biggest transaction in the local telecom market since the privatization of former state-owned telecom company Matav (now Magyar Telekom) after the regime change .

4iG already indirectly owns 25% of Hungary’s third-largest mobile operator Telenor, having bought a majority stake in state-owned telecommunications company Antenna Hungaria last year.

Over the years, 4iG has grown from a small IT company to an ICT giant through a series of acquisitions in Hungary and abroad, creating a leading telecommunications group in the CEE and SEE region. Its owner, Gellert Jaszai, is the right-hand man of Hungary’s most powerful oligarch, Lorinc Meszaros.

Economy and Development Minister Marton Nagy said the deal qualified as a transaction of “national strategic importance”, granting an accelerated clearing procedure.

The acquisition will create the conditions for the establishment of a leading national player in the ICT market that can “contribute to the improvement of the country’s competitiveness, in line with the digital challenges of the 21st century”, while providing ” exceptional quality service” to its nearly 4 million individual and business subscribers, he added.

Nagy noted that the government had set targets after coming to power in 2010 to increase national ownership in strategic sectors to more than 50% and that these targets had already been achieved in the banking, finance and finance sectors. energy and media.

Vodafone said the combination with 4iG is complementary, with limited overlaps. Adding the company’s infrastructure to the 4iG group will create a stronger competitor for incumbent Magyar Telekom, Vodafone Group said. Vodafone’s shared services business in Hungary, VOIS, is not included in the transaction.

Vodafone, with a workforce of 3,000, was the first company in Hungary to offer 5G services to its subscribers, and the company’s next-generation mobile service is expanding nationwide with hundreds of base stations. base in Budapest and the Balaton region.

The price paid for Vodafone’s Hungarian unit is roughly equivalent to the amount of money the government plans to raise from windfall taxes to cover the budget shortfall, which reached 84% of the annual target in July. These exceptional taxes have also affected the telecommunications sector, souring the market for investors.

The FinancialTimesThe Lex column commented: “Acquirers of unlisted Vodafone Hungary are paying a decent price of 9.1 times rear Ebitda. European telecoms are trading on average at just over 6 times adjusted Ebitda, analysts say. of New Street.”

The enterprise value of the transaction is 7.7 times the Ebitda of Hungary’s second-largest mobile operator, which closed its 2021/22 financial year with revenue of HUF 278 billion.

Opposition parties have criticized the deal, saying the government should focus on helping households with higher energy bills in times of crisis or use funds to boost teachers’ salaries.

There could be question marks over the financing of the deal, local media note. 4iG is heavily indebted and it could be risky for local banks to extend credit to the company, with HUF 537 billion in debt versus HUF 149 billion in equity. 4iG did not respond to questions about the issue.

4iG’s share price jumped 10.5% to a seven-month high of 860 HUF on the Budapest stock exchange on Monday.

Laura T. Thrasher