Telia, Turkcell Agree Sale Of Kcell To Kazakhtelecom

Telia Company has confirmed the sale of Kazakhstan mobile operator Kcell, which it jointly owns with Turkcell, to state-controlled operator Kazakhtelecom. The fixed operator will pay USD 446 million for the 75 percent stake.

Kazakhtelecom is already active in the mobile market through its brand Altel, which is a minority shareholder in the joint venture Tele2 Kazakhstan. Tele2 and Kazakhtelecom have respective put and call options to sell their stakes at the end of Q1 2019. They compete against Veon’s Beeline as well in the Kazakhstan mobile market.

Regulatory conditions
Kazakhtelecom, which has been in talks since at least early this year on the acquisition, said the deal will help strengthen its position on the mobile market and as an integrated operator. The anti-monopoly authority in Kazakhstan has already cleared the deal, so the transaction is expected to close before year-end.

Kazakhtelecom agreed to a number of conditions in order to secure regulatory approval. These include maintaining the Kcell and Activ brands as well as their tariff plans for at least three years and continuing its joint network infrastructure development with other market players. The company also agreed to expand LTE coverage to all towns with at least 4,000 residents by the end of 2021 and launch 5G services by the same date.

Eurasia exit completed
The deal completes Telia’s exit from the Eurasia region, following the recent sale of its Uzbekistan assets. The company said it also reached a deal to acquire Turkcell’s share in Fintur, their holding company for a 51 percent stake in Kcell, so Telia can repatriate cash from Fintur. Turkcell said it expects to receive EUR 350 million for its 41.45 percent stake in Fintur.

Telia holds a 24 percent direct stake in Kcell, plus the Fintur holding, while 24 percent of Kcell is listed on the London Stock Exchange and the Kazakhstan Stock Exchange. Kazakhtelecom is controlled by the government of Kazakhstan, through the sovereign wealth fund Samruk-Kazyna.

The deal values Kcell at 5.0x EBITDA for the 12 months to September, or a total of USD 771 million for 100 percent on a cash- and debt-free basis. Telia said it completed “strict compliance and purchaser due diligence and is satisfied that all relevant checks and controls have been carried out with satisfactory results”, and Kazakhtelecom “is a buyer that meets Telia Company’s requirements”. #

Debt reduction
Telia said it expects to realise a one-time gain of SEK 1.1 billion from the sale, before accumulated foreign exchange losses of SEK 0.9 billion. On a pro forma basis, the divestment is estimated to decrease net debt to EBITDA by 0.1x. The divestment of Ucell and the dismantling of Fintur will have net zero impact on leverage.

The deal with Turkcell will close in January and still leaves Telia with Moldcell in Moldova, in which it will be the sole shareholder. Turkcell said it will use the proceeds of the deal to reduce debt and improve its forex position, with its leverage expected to fall to below 1.5x EBITDA. – Telecompaper