Vodafone to sell its Hungarian branch for £1.5bn

Vodafone has announced plans to sell its Hungarian arm in a £1.5bn deal with a national company.

The telecommunications giant said it had “reached terms” – similar to a letter of intent – for the deal.

This would see Hungarian company 4iG take over Vodafone Hungary.

4iG will pay 715 billion Hungarian forints (£1.5 billion), or 9.1 times its Ebitdaal (earnings before interest, tax, depreciation and amortization, after leases) for the last financial year.

Bosses said the deal fits well with the Hungarian government’s hopes of creating a big, locally owned telecoms giant.

After the purchase, 4iG will be the second largest mobile and fixed communications company in Hungary.

Vodafone CEO Nick Read said: “The Hungarian government has a clear strategy to create a Hungarian national champion in the ICT (information and communication technology) sector.

“This combination with 4iG will enable Vodafone Hungary, which has a proud history of success and innovation in the country, to play a major role in the future growth and development of the sector as a larger scale operator and fully converged.

“The combined entity will increase competition and have better access to investments to further digitize Hungary.”

Victoria Scholar, Head of Investments at Interactive Investor, said: “It is clear that the Hungarian government is keen to build its own national telecommunications champion with Vodafone ready to take the money in exchange for the spin-off.

“In November last year, Vodafone CEO Nick Read said he was pursuing consolidation in Europe.

“Now the telecoms giant can focus more of its attention on Germany, a market it considers the most attractive on the continent.

“There is also M&A (M&A) potential for Vodafone in the UK given recent reports that it was considering a merger with the UK division of Three.

“Vodafone’s share price is down over the long term, halving since the peak in January 2018, but it still offers an attractive dividend yield.”

Laura T. Thrasher