Orange Romania on Monday announced that it signed a deal to acquire a controlling 54% stake in Telekom Romania Communications (“TKR”), in a transaction that will significantly accelerate Orange’s strategy to become the preferred choice of customers for convergent services in the Romanian market. Orange will pay a total of €268m, on a debt-free, cash-free basis and subject to customary adjustments at closing, corresponding to a total enterprise value of €497m, based on 100% of Telekom Romania Communications and the convergent customer base.
TKR is Romania’s second largest player in fixed telecoms with revenues of €622m reported in 2019. Through its owned network infrastructure, TKR provides fixed voice, broadband and pay-tv services to 5 million customers and its approximately 90,000 km fiber network connects some 3 million households. It also provides convergent services to approximately 881 thousand fixed-mobile convergent subscribers, as at 30 June 2020 through an MVNO contract with Telekom Romania Mobile. These customers will migrate to Orange Romania’s network, following the completion of the transaction.
Orange Romania reported €1.1Bn revenues in 2019 and is the number one mobile operator in Romania. Thanks to this acquisition Orange will accelerate its convergent operator strategy which, when combined with TKR’s fixed network, will create a fully infrastructure-based convergent operator across B2C, B2B and ICT markets.
“The future combined entity will aim to become the preferred choice of customers for convergent services in the Romanian market both for consumer and business segments. This transaction will also generate significant synergies deriving mainly from the cross-selling of services to existing customers, as well as the optimization of the network including economies of scale and scope,” a press release issued by Orange informs.
The closing of the transaction is subject to customary condition precedents, notably antitrust clearance by the European Commission and other relevant authorities and is expected to be completed within the second half of 2021. Until this approval and the completion of the transaction is obtained, both companies will continue to operate independently.
Mari-Noëlle Jégo-Laveissière, Deputy CEO, in charge of Orange in Europe, commented: “This acquisition is an important step to accelerate our convergence strategy in Europe. Romania is a key market for Orange and a great success story. This transaction confirms our long term commitment to the Romanian market. We are looking forward to contribute to the development of the telecoms sector through sustained investments in top performing network infrastructures and innovative services.”
Liudmila Climoc, CEO, Orange Romania, commented: “This is a significant milestone for the Romanian telecom market that will enhance its attractiveness both in terms of converged telecoms services and high quality infrastructure, while increasing competition. It will provide the opportunity to scale up innovative convergent services, bringing broader benefits and wider choices to the customers and also to the country’s digital economy sustainable development. Orange Romania’s and Telekom Romania Communications’ network complementarity will allow us to bring together not only customers and teams, but also the best of expertise in terms of quality of service and future-proof mobile and fixed networks infrastructure.”
OTE agrees to sell TKR to Orange Romania
On the other hand, Hellenic Telecommunications Organization S.A. (“OTE S.A.”) has also announced on Monday that it has entered into an agreement to sell its 54% stake in Telekom Romania Communications S.A. (Fixed, Telekom Romania or “TKR”) to Orange Romania.
According to a press release, the agreed consideration is €497m for 100%, corresponding to €268m for OTE’s stake, on a debt-free, cash-free basis and is subject to customary adjustments at closing of the transaction, such as for net debt, working capital and pre-Closing items.
OTE will retain ownership of Telekom Romania Mobile Communications S.A.
Currently, TKR operates a nationwide fixed network serving approximately 930,000 broadband customers and 1.2m TV subscribers. In 2019, TKR generated €622m revenues.
The sale is not expected to have a material impact on OTE’s free cash flow outlook, or its debt position.
Telekom Romania’s acquisition by Orange Romania will enhance the market’s competitiveness while securing the company’s future, through long term investments, supporting the digital transformation of the Romanian economy and society, as well as offering stability and positive prospects to its employees.
The transaction is subject to regulatory approvals and other conditions and is expected to be completed within the second half of 2021. Following completion, the net consideration after transaction expenses and required provisions, will be distributed to OTE shareholders.
OTE’s Chairman and CEO, Mr. Michael Tsamaz, noted: “The sale of Telekom Romania is a strategic decision in the context of OTE Group’s redefined priorities and growth plans, in order to support the Group’s development and create value for all stakeholders. OTE has committed extensive resources over the years to support Telekom Romania’s performance, while it remains in the market through Telekom Romania Mobile. I would like to thank Telekom Romania’s management and employees for the company’s accomplishments to date and I am confident that they will continue to offer their best not only during the period till the completion of the transaction, but also under the new ownership. The acquisition of the company by Orange Romania ensures its future growth and creates the conditions to further strengthen market competitiveness to the benefit of its customers and to support the digital transformation of the Romanian economy and society.”
Barclays Bank PLC is acting as OTE’s financial advisor. Dechert, Eversheds and Freshfields act as OTE’s legal and regulatory advisors.
According to the press release issued by OTE, as of Monday November 9, the tenure of the CEO of Telekom Romania Communications S.A. and Telekom Romania Mobile Communications S.A., Miroslav Majoroš, is successfully coming to its end. Mr. Vladan Pekovic is appointed as CEO, with the mandate to ensure a smooth transition upon the transaction’s completion and further develop the mobile operations.
„I would like to thank Mr. Majoroš for his valuable contribution during the past five years. Focused on digitalization, convergence and growth mindset, he achieved a sustainable business turnaround. The constant effort and commitment of the entire Telekom Romania team, resulted in the company’s significant transformation and improved performance”, Mr. Michael Tsamaz said.