Vodafone sells its Hungarian business for $1.8 billion to state-backed groups

Vodafone has agreed to sell its Hungarian operations for $1.8 billion, in a deal that will streamline its global operations and reduce debt while helping Prime Minister Viktor Orbán consolidate his influence in the sector .

The UK-based telecommunications group said on Monday it had reached a non-binding agreement to sell 100% of its business to 4iG, a sprawling holding company with close ties to the Budapest government, and Corvinus Zrt, a holding company Hungarian state. .

Vodafone’s strategy has been under scrutiny since January, when it emerged that Cevian Capital, Europe’s biggest activist investor, had taken a stake and was pushing for a simplification of the group’s sprawling business and the sale of little-known businesses. efficient.

Nick Read, chief executive of Vodafone, expressed his ambition to scale up and pursue mergers and acquisitions in important markets, such as Spain, Portugal, Italy and the United Kingdom. The additional cash from the sale of its Hungarian business would help reduce its net debt, which stood at 41.6 billion euros in March.

The combination of Vodafone Hungary and 4iG will create the Central European country’s second-largest mobile and landline operator, making it a stronger competitor to incumbent Magyar Telekom, a subsidiary of Deutsche Telekom.

Read said: “The combined entity will increase competition and have better access to investment to further digitize Hungary.”

Orbán, Europe’s longest-serving head of government who won a fourth straight landslide victory earlier this year, has increased his power in Hungary’s business world.

4iG has been an important player in its plans to develop more influence in the telecom sector. The company said last year that it wanted to “create a telecommunications infrastructure provider that can adequately represent national interests in the industry, outside of competitive market services.”

“Since 2010, governments have clung to the overriding objective of sharply increasing the proportion of Hungarian ownership in strategic industries, preferably by majority,” Economic Development Minister Márton Nagy said in a statement.

“This goal of the government has already been achieved in the banking, energy and media sectors, and now a Hungarian company, with the support of public ownership, also has a chance to become an important player on the market. telecommunications market.

The sale price of Ft715 billion ($1.8 billion) represents more than 9 times Vodafone Hungary’s adjusted earnings before interest, tax, depreciation and amortization for the 12 months to March. Vodafone’s services business, VOIS, is not included in the transaction and will continue to operate in Hungary.

Vodafone said last month it was on track to deliver its full-year guidance, expecting Adjusted Ebitda to be between 15 and 15.5 billion euros. The group’s total turnover in the last quarter increased slightly to 11.3 billion euros, against 11.1 billion euros a year earlier.

Emirates Telecommunications Group announced in May that it had acquired a 9.8% stake in Vodafone for around $4.4 billion, one of the largest investments it has made in more than a decade. The state-controlled investment group, whose chief executive spent 17 years in senior roles at Vodafone, expressed support for the company’s management and strategy.

The company’s share price was flat on Monday morning, but has gained 6% this year to 122p.

Laura T. Thrasher