Danish telecom TDC sells Swiss offshoot

17th September 2010, Comments 0 comments

Danish telecom group TDC said Friday it would sell its Swiss offshoot Sunrise to a private equity firm, with analysts suggesting the deal might allow France Telecom to again try to buy Switzerland's second largest operator.

TDC agreed to sell 100 percent of Sunrise to CVC Capital Partners, based in Luxemburg, for 3.3 billion Swiss francs (2.5 billion euros, 3.3 billion dollars)

"Today CVC and TDC have signed an agreement on selling TDC's Swiss subsidiary Sunrise to the private equity firm CVC," TDC said in a statement, adding that the deal was subject to approval by Swiss competition and regulatory authorities.

Up until just a few months ago, TDC had been planning to merge Sunrise with France Telecom's Orange's Swiss business.

It abandoned the plans in June following a veto by the Swiss Competition Commission (COMCO) a few months earlier on grounds that a merger of the country's second and third largest operators would would have taken a dominant position alongside top provider Swisscom, leaving the country with just two networks.

Telecom analyst John Strand, of the Strand group, however pointed out Friday that Sunrise's sale to a private equity firm could open the way for France Telecom to give the discarded deal another shot.

"The buyer, as a private equity firm, is only interested in reselling and making a profit. It could thus sell Sunrise, which is showing good growth, to France Telecom, in the hope of convincing Swiss competition authorities to soften their position," he told AFP.

He pointed out that while the price TDC got for its Swiss offshoot was "acceptable," it was less than the 2.7 billion euros France Telecom had been willing to pay.

The Danish company itself paid nearly 4.7 billion euros for Sunrise at the height of the telecom bubble in 2000.

Sydbank analyst Morten Imsgaard agreed that CVC's interest in Sunrise was likely closely linked to the prospect of making a profit in a future sale.

"I'm asking myself what CVC Partners see in the way of opportunities in Sunrise, in light of the high level of competition" in Swiss mobile telephony, he told AFP.

"Reselling Sunrise with a profit, possibly to France Telecom, would be a possibility, but only if Swiss competition authorities change their minds," Imsgaard said.

TDC chief executive Henrik Poulsen meanwhile celebrated Friday's deal.

"Sunrise has gone through a very positive development in recent years. This is reflected in the deal we have signed," he said in the company statement.

"A divestment (from Sunrise) is a natural next step in our wish to focus TDC as a Nordic communications company. I am glad we have found a strong future owner to ensure that Sunrise will continue the positive development," he added.

Imsgaard maintained meanwhile that TDC had "no other choice but to sell." "Sunrise had been a ball and chain for TDC which would have been forced to make too big investments and spend too much capital to face the harsh competition from Swisscom and Orange (France Telecom) in Switzerland," he pointed out.

TDC, which for the past five years has been nearly fully owned by five British and US private equity firms, including Blackstone and Apax Partners, expects to book "a gain of approximately 650 Danish kroner (87.2 million euros, 115 million dollars) after tax" from Friday's deal.

For the Danish company's owners, who yanked most of its shares off the Copenhagen stock exchange in 2006, the aim with the sale was clear: to pursue their strategy of focusing on the Nordic market and to prepare a return to the bourse, observers said.

Today, only the 12 percent of TDC held by Danish shareholders who opposed the company's sale five years ago remains on the Copenhagen exchange.

Analyst Strand said he would not be surprised to see the remaining nearly 90 percent of the company's shares begin trading in the Danish capital "before Christmas," which would be a prelude to the equity firms divesting from the telecom operator.

© 2010 AFP

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