UPC Romania, the cable and broadband provider, will be sold to Vodafone as part of an international deal.
Liberty Global, the parent of UPC Romania, has decided to sell its operations in Germany, Hungary, Romania and the Czech Republic to Vodafone for a total enterprise value of around EUR 19 billion on U.S. GAAP basis, as compared to EUR 18.4 billion (USD 22 billion) on an EU-IFRS basis.
Vodafone Romania is the second largest mobile provider, while UPC Romania is the second largest NGN operator in Romania, with 3.1 million homes passed (41 percent of total households).
Murielle Lorilloux, CEO of Vodafone Romania, said: “This transformative acquisition will create a significant supplier of converged telecoms services adding more competition within the Romanian market. This will benefit the customers of both companies and the Romanian economy because it will be a catalyst for further innovation in services and will provide greater scale to upgrade our fixed networks. Vodafone and Liberty’s businesses in Romania have in common a customer approach focused on the quality of service and are highly complementary, bringing together Vodafone’s mobile customers with UPC Romania’s broadband and TV customers.”
The four operations accounted for around 28 percent of Liberty Global’s consolidated 2017 cash flow.
Mihnea Radulescu, CEO of UPC Romania, said that until the approval from authorities and the completion of the transaction, UPC will continue to function independently on the market, as a company member of Liberty Global.
Under the terms of the deal, Liberty Global has agreed to provide certain transitional services for a period of up to four years. These services principally comprise network and information technology-related functions. The annual charges will depend on the actual level of services required by Vodafone.
“In each of these markets, the combination of Liberty Global and Vodafone’s businesses will transform the competitive landscape and bring a new level of convergence to customers. Now more than ever, Europe needs strong competition from scaled national challengers willing and able to invest in next-generation wireless, video and broadband services,” said Mike Fries, CEO of Liberty Global.
In 2017, UPC Romania had over 2.4 million subscription contracts, while the number of subscribers stood at 1.34 million.
In the case of Vodafone Romania, the number of customers stood at 9.94 million in the quarter that ended of December 2017. Out of the total figure, around 9.2 million were users of mobile services.
The combined company will be able to offer interactive TV services, broadband internet and fixed-line telephony services, as well as mobile, to Vodafone Romania’s 9.9 million mobile customers and UPC Romania’s 2.1 million fixed revenue generating units. The combined company will have a total communications revenue market share of 25 percent.
“After completion of the transaction, Liberty Global will continue to be Europe’s leading cable television and
broadband provider, with consolidated operations in the United Kingdom, Ireland, Belgium, Switzerland, Poland
and Slovakia. Together, these country operations reach 24 million homes, account for 26 million video,
broadband and fixed-line telephony subscribers and 6 million mobile services. In addition, Liberty Global owns
50 percent of VodafoneZiggo, a joint venture in the Netherlands with 4 million customers subscribing to 10 million fixedline and 5 million mobile services,” said Liberty Global in a statement.
LionTree and Goldman Sachs are acting as financial advisers to Liberty Global on the transaction.
“Vodafone estimates the deal will deliver cost and capex synergies of EUR 535 million per year before integration costs by the fifth year post completion, with an estimated net present value of over EUR 6 billion. The company estimates revenue synergies with net present value exceeding EUR 1.5 billion. Regulators may have concerns and there is a risk that it doesn’t happen. (…) One thing is for sure, with the mounting costs of building out network capacity and 5G etc, telecoms firms have decided they need to combine or merge assets to have the necessary scale,” said Neil Wilson, chief market analyst for Markets.com.