Vodafone Group PLC (NASDAQ: VOD) has reached a “heads of terms” agreement (basically, a letter of intent or memorandum of understanding) with Hungarian IT and telecom operator, 4iG, and state holding company, Corvinus, for 100 percent of its Vodafone Hungary unit at an enterprise value of $1.8 billion, according to Digital TV Europe. This figure represents a multiple of 9.1x Adjusted EBITDAaL for the 12-month period ending in March. The deal is expected to complete by the end of 2022, pending requisite due diligence, a binding transaction agreement and regulatory approval.
Vodafone Hungary is one of several converged network operators in Hungary. A combination with 4iG will create a clear second place operator across mobile and fixed communications with broader information and communications technology (ICT) capabilities. Aligning these operators also “supports the Hungarian state’s goal of creating a national ICT champion.” Under the proposed deal, 4iG will garner a 51 percent share with the Hungarian state taking a 49 percent stake.
The combination with 4iG is complementary, with limited overlaps. The addition of Vodafone Hungary’s infrastructure to the 4iG group will create a stronger competitor to the incumbent operator, Deutsche Telekom-owned, Magyar Telekom.
4iG said the acquisition would “fundamentally reshape the Hungarian telecoms market” with the combined entity offering a combination of fixed voice, internet, pay-TV and digital terrestrial broadcasting along with mobile telecoms, reports Digital TV Europe.
Vodafone Hungary is already the number two player in Hungary in terms of the number of subscriptions, with over 3.8 million residential and business customers, including 700,000 fixed broadband customers. The pair together will have five million customers and 7.6 million revenue-generating units.
“The acquisition of Vodafone Hungary will be the most significant domestic telco transaction in the last 30 years, of a similar extent to the privatization of Matáv after the regime change. The acquisition will create a predominantly Hungarian-owned group of infocommunications companies and a clear number two operator in the Hungarian market,” says Gellért Jászai, Chairman and CEO of 4iG.
Nick Read, Vodafone Chief Executive, comments, “The Hungarian Government has a clear strategy to build a Hungarian owned national champion in the ICT sector. This combination with 4iG will allow 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 much stronger scaled and fully converged operator. The combined entity will increase competition and have greater access to investment to further the digitalization of Hungary.”
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