Deutsche Telekom, Tele2 join forces to challenge Dutch duopoly
December 16 2017 10:48 PM
The T-Mobile logo sits on top of the Deutsche Telekom headquarters in Bonn, Germany. Deutsche Telekom will buy the Dutch business of Sweden’s Tele2 and combine it with its T-Mobile Nederland to give it more muscle to challenge rivals KPN and Ziggo.


Deutsche Telekom will buy the Dutch business of Sweden’s Tele2 and combine it with its T-Mobile Nederland to give it more muscle to challenge rivals KPN and Ziggo.
Analysts have said a merger of T-Mobile and Tele2 in the Netherlands might make sense as the two lie a distant third and fourth place in the Dutch market.
Their relatively small market positions will also reduce the risk of any regulatory objections to this ‘four-to-three’ consolidation.
“We are confident that this deal should be approved,” Tele2 CEO Allison Kirkby told a conference call.
“This is going to create proper competition to the duopoly and allow both of us to be stronger together than we were as individual stand-alone companies.”
Deutsche Telekom had said last month it was open to merging T-Mobile Nederland with the local business of Tele2, or floating the Dutch mobile operator on the stock market.
Tele2 shares rose 6% in European trading yesterday, following what brokerage Jefferies called “an elegant exit from a strategically difficult situation.” Deutsche Telekom shares were little changed.
“I think it’s completely right, the market is tough and it’s good for all operators,” Inge Heydorn, fund manager at Sentat Asset Management, said.
Under the deal, Tele2 will receive €190mn ($224mn) in cash and a 25% stake in the enlarged T-Mobile NL, the two companies said on Friday.
The combined business would have revenues of €2bn and 4.3mn mobile post-paid subscribers and expects to generate benefits of €150mn within three years of closing, they said in a joint statement.
Until now T-Mobile NL has been a pure mobile play, while the merged entity would pursue a so-called fixed-to-mobile convergence strategy that allows for transmission of data, voice and video to devices at home or on the go. 
The companies said they expected the deal to close in the second half of 2018 subject to regulatory clearance.
Deutsche Telekom had put its Dutch business in a division headed by its M&A chief Thorsten Langheim, who has adopted the aggressive marketing stance of T-Mobile US that includes unlimited data plans.
“We’ve started our journey to disrupt the Dutch market and we will be creating a viable and strong attacker of the duopoly KPN and VodafoneZiggo,” Langheim said in the statement.
KPN, the former state telecom company, has a market share of 43% and Ziggo, a joint venture between Vodafone and Liberty Global, has about 30%. 
T-Mobile Nederland has since the start of 2016 captured more than half of net post-paid customer additions, lifting its market share to 21% and dwarfing Tele2’s 5%.
Before the transaction is completed, T-Mobile NL will spin out its mobile tower operation, which will remain under the full control of Deutsche Telekom.
The German parent is exploring ways to realise value from its towers, which typically command a higher valuation than mobile telecoms.
The towers sector has already been largely consolidated by specialist players in the United States.
The enlarged T-Mobile NL is expected to be capitalised with an intercompany loan receivable by Deutsche Telekom of around €1.1bn, the two companies said.
Tele2 also said it expected to book an impairment of SEK 1.0-1.5bn ($118-$178mn) related to its Dutch operations in the fourth quarter, under discontinued operations.

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