Telia+Telenor=Sant i Danmark.

TeliaSonera and Telenor to combine their operations in Denmark

2014-12-03 08:00
TS Intro Content
Today we have announced that TeliaSonera and Telenor have entered into an agreement to merge
their Danish operations into a new joint venture where the parties will own 50 percent each.
The new joint venture will create a robust mobile operator who is able to increase investments
in networks to the benefit of our customers.
TS Page Content
“We are making a necessary and natural move by forming a joint venture with Telenor building on the network partnership we already have with them. By joining forces we can secure investments in Denmark, to the benefit not only of our customers but to the Danish society as a whole,” says Robert Andersson, EVP and Head of Region Europe in TeliaSonera.

The new company will have a combined number of mobile subscriptions of around 3.5 million. With a combined mobile subscriber market share of approximately 40 percent, revenues of more than DKK 9 billion and a significant synergy potential, the transaction creates a robust operator.
The need for consolidation in the Danish telecom market has been apparent for a while as operators face continued pressure on revenues and profitability, limiting the room for investments and innovation. Telenor and TeliaSonera have since 2012 cooperated in Denmark through their joint mobile network. The parties now agreed that an independent joint venture is the strategically preferred route to capture synergies and to create value.
“Competition in Denmark is intense and we face continued pressure on revenue growth and profitability, making consolidation inevitable. By combining the assets and customer bases of Telenor and TeliaSonera in Denmark, the joint venture will become a robust operator. We will be able to offer our customers a high-quality network with outstanding connectivity and the best customer experience in Denmark,” says Kjell Morten Johnsen, EVP and Head of Telenor Region Europe.
Efficiency gains
The merger of the two operations aims for annual efficiency gains of at least DKK 800 million, with full effect from 2019. The largest areas of synergies are envisaged for distribution, sales and marketing and call centers, administrative costs, network and IT. Integration costs are expected to total DKK 800 million during 2015-2017.
Benefits for customers
The combination of TeliaSonera and Telenor, two companies willing to invest and considered as technology leaders in telecommunications, will also bring substantial benefits to customers in Denmark. It will provide a larger distribution network as well as the best network connectivity in terms of coverage and performance. In addition, the merger will put the joint venture into a better position to invest in attractive and user-friendly services. Combining the fixed networks and services of the two companies will create an even better broadband provider for Danish consumers and businesses.
Governance structure
The Board of the new joint venture company will have a balanced representation from Telenor and TeliaSonera. The board will have seven members, of which each party shall appoint three. The Chair of the Board shall be appointed unanimously by the parties.
The recruitment process to find a CEO for this joint venture will commence and the two companies are confident in finding the right candidate for this job in due course.
Valuation
Telenor and TeliaSonera have agreed that the enterprise values of their respective operations are fairly equal and hence the agreement is based on equal ownership. Differences in net debt and changes in working capital from signing to closing will be settled in cash.
Timeline
Telenor and TeliaSonera have agreed upon the key transaction terms. The transaction requires approval from the EU Commission. The parties expect EU clearance and closing of the transaction during 2015. The operations remain separate and operate independently up to the closing of the transaction.

This was communicated in a press release this morning. Read the full press release.

Employees in Denmark will find more information on the Dannish intranet and there will be local meetings with all employees. A press conference will be held in Denmark at 11.30 CET.

Answers to some potential questions:

What will happen to the Danish employees in TeliaSonera and Telenor?
Short term it is business as usual, meaning that we deliver in accordance to set plans and our customer’s needs. What we announce today is the aim to create a strong mobile operator in Denmark. It is too early to comment on what will happen to all employees. The EU regulators will not give their approval until September 2015. But the plan is to merge the operations and move customers and employees to the new company.

Why don’t you just invest to grow organically in Denmark?
Because we do not believe that is a viable option when looking how the market works as of today. To form a major mobile operator in Denmark will mean increased competitiveness and great opportunities for many of our employees.

Will people be made redundant?
When you merge two companies there will be redundancies, but it is much too early to discuss that in any detail and we do not want to give a number. Having said that, we do this to create a sustainable competitive company in the Danish market, over time that is what counts in order to secure job opportunities. This joint venture will take time to complete. Our commitment to everyone is to make this transition as smooth as possible.

How can you describe this as something positive?
It is positive to be part of a company which can stay competitive; if we can’t stay competitive long-term the company’s future will be at risk.  The new company will be more stable, have solid customer base and will deliver increased customer satisfaction. This will lead to stronger financial deliverables which enables us to further grow and look for new possibilities in the Danish market. By securing growth we can create interesting jobs and new development opportunities.

When will we get more information?
We will keep employees informed and tell more as soon as it is possible. The forming of the joint venture will have to be approved by the competition authorities in the EU. We do not expect it to be finalized until well into of next year, so currently it is business as usual.

I work currently for Group Commercial/Group technology/Group Strategy and Business development and not only for a Danish company, how will I be impacted?
We will go through every task and see how the future belonging will be organized. As a principle Group function employees who work mainly for Global deliveries continue to be under TeliaSonera Group responsibilities and they are not part of the merge. However they may be employees who mainly work for the Danish business and naturally they will be part of the new company. We need to come back with further analysis on this issue and go through the tasks of every employee.

Can you be more specific on how you will make this new organization work?
We will listen to our employees by meeting a lot of people the months ahead. We will explain why we are doing this, what will happen and how it will make us more competitive in the Danish market. This will create a new, dynamic – and most importantly – profitable Danish operator.
However before we have obtained necessary approvals from EU and other officials we will not co-operate with Telenor in operational issues. We are still competitors and it is very important that all the contacts with the competitors will take place by the dedicated persons in the project.

How will the new company be set up?
The new company will be set up independently from TeliaSonera and Telenor. It will be reported as an associate company in our respective financial reports. The Board will be made up of three representatives from TeliaSonera and three from Telenor plus an independent Chairman nominated unanimously by the two companies.

Who is going to be the new CEO?
The recruitment process will start and we will finalize and communicate the appointment when ready. Most likely that will take place after necessary EU approvals have been obtained.

Questions concerning customers

Can you explain why a joint venture between Telia and Telenor in Denmark is good for the Danish customer?
In short this will make us bigger and more efficient since we can make substantial cost savings. Customers can expect increased investments – which has been decreasing in Denmark – in new technology and faster networks. 5G is in the pipeline. All in all, this will provide our customers with better services and attractive mobile offerings.

How will this affect customer prices?
The synergies will definitely benefit our customers. We will launch attractive and competitive offerings when the new entity is up and running. The competition will be tough