Vodafone to sell Hungarian unit for $1.82bn

April 2023 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

April 2023 Issue

British telecoms group Vodafone has agreed to sell its Hungarian business to local IT company 4iG and the Hungarian state for $1.82bn, including debt. The deal, initially announced in August 2022, is part of Vodafone’s plan to simplify its sprawling business.

Under the terms of the deal, Vodafone will receive a fee which is 7.1 times its earnings before interest, taxes, depreciation and amortisation (EBITDA) for the financial year ending 31 March 2022. Under the terms of the agreement, 4iG, as a professional investor, will acquire a 51 percent controlling stake in Vodafone Hungary through its subsidiary Antenna Hungária, while the Hungarian state will acquire a 49 percent indirect stake. The deal does not include VOIS, Vodafone’s IT and business support venture. The combination with 4iG will create the second-largest mobile and fixed communications company in the country, the company said in the statement.

4iG notes that the transaction announced on the Budapest Stock Exchange is of particular importance in the history of Hungarian telecommunications in various respects. The national group created by the merger of fixed and mobile telecoms portfolios of 4iG Group and Vodafone Hungary will reopen the market in numerous service areas and strengthen its role in offering convergent telecoms services.

The deal fits into a pattern of expanding state ownership in the economy under the 12-year rule of Viktor Orban, Hungaria’s prime minister, while helping businesses close to the premier acquire prized assets, which have included businesses in the banking, insurance, energy, aviation, telecommunications and media industries, according to Bloomberg.

Vodafone is the leading mobile network in Hungary in terms of voice and data reliability, with 800,000 fixed line customers and 3 million mobile customers. Following the closing of the transaction, the combined portfolio of 4iG Group (DigiMobil) and Vodafone will be the second largest in the mobile voice and internet services market, which is the largest revenue generator. 4iG will secure market leader position in fixed line internet services and will also become market leader in the TV broadcasting market.

“This combination establishes a scaled converged operator across mobile and fixed communications and supports the Hungarian government’s goal of creating a national Information and Communications Technology champion,” said Margherita Della Valle, interim chief executive of Vodafone Group. “The combined entity will increase competition and accelerate investment in the ongoing digitalisation of Hungary.”

“The acquisition of Vodafone Hungary opens a new chapter in the Hungarian telecommunications market,” said Gellért Jászai, chairman of 4iG Nyrt. “It is the first info-communications group in almost thirty years that can operate as a Hungarian majority-owned convergent operator. The strategic cooperation between the Hungarian state and 4iG in this transaction will not only transform the market but also improve competitiveness and accelerate the digital transformation of the economy.”

The government plans to label the assets as strategically important, said Marton Nagy, the economic development minister, in a statement. That means the purchase will not face regulatory scrutiny.

After almost three decades of global expansion riding the proliferation of wireless services, Vodafone has retrenched, selling some of its assets and focusing on core markets in Europe and Africa. Vodafone intends to use the proceeds from the sale to pay down existing debt. The company is also in the process of looking for a new chief executive after the board grew unhappy with the progress made by Nick Read, who failed to grow the group or pull off the right deals to consolidate a fragmented European telecoms market. Mr Read, before leaving Vodafone, issued a warning over job losses and price hikes for customers as the company trimmed its profit guidance range for the full-year and posted a 3 percent drop in interim earnings.

Richard Summerfield