France Telecom and TDC agree to merge Orange Switzerland and Sunrise to create the leading alternative operator in the Swiss telecom market
Renens, Zurich, Paris and Copenhagen - France Telecom and TDC announce today that they have reached an agreement to combine their respective Swiss subsidiaries, Orange Communication S.A. (“Orange Switzerland”) and Sunrise Communications S.A. (“Sunrise”). The combined entity will create the leading nationwide alternative provider of telecommunications services in Switzerland.
France Telecom will pay at closing a net amount of €1.5 billion to TDC and, as a result of a series of steps, become a 75% shareholder in the combined entity, and TDC will hold the remaining 25%.
With approximately 3.4 million mobile(1) and 1.1 million fixed and broadband customers(2), the combined entity will account for around 38% of the mobile telephony market(3) and 13% of the fixed broadband connections(4). For 2008, the combined entity would have generated total pro-forma revenues of CHF 3.1 billion (€2.0 billion) and EBITDA of CHF 809 million (€534 million). As a full-service nationwide fixed and mobile operator, it will broaden the scope of services offered through more than 100 shops throughout Switzerland, bringing the best of both companies’ offers to a larger number of customers.
Gervais Pellissier, France Telecom Deputy CEO and CFO, said: “The planned merger of Sunrise and Orange Switzerland marks a new significant step in the long-term investment by France Telecom-Orange in Switzerland. Following the UK joint venture between Orange and T-Mobile, France Telecom completes another major in-market consolidation, consistent with its M&A policy.”
Jesper Ovesen, TDC CFO, said: “We are pleased with the transaction and believe that the combination will create a stronger player in the Swiss telecommunications market. We look forward to working with France Telecom and creating further value for all stakeholders. The agreement is a natural last step towards TDC focusing on the Nordic markets, which is our strategic goal.”
This merger will bring substantial benefits to Swiss customers. It will result in better mobile network coverage, broadband capacity and quality for 2G and 3G services, with notable environmental benefits. Joint network development would lead to a reduction of around one third in the projected number of mobile telephone antennas compared to the original standalone network build-up plans. In addition, the combined entity would bring a better customer reach and service through a larger network of shops and improved customer services.
Thomas Sieber, CEO of Orange Switzerland, added: “This merger is a further proof of France Telecom’s lasting commitment to our country, and will offer us fabulous opportunities by creating the leading alternative operator in the Swiss telecom market.”
“The merger with Orange is an important milestone for us,” said Sunrise CEO Christoph Brand. “This is a logical way for us to improve our competitive position in the Swiss market and create a better product offering for our customers. The combined group will be better placed to make the necessary investments for the future and allow us to play a more active role in shaping the market.”
The combination and integration of Sunrise and Orange Switzerland is expected to generate synergies with an estimated net present value of €2.1 billion (CHF3.2 billion).
• Estimated Opex-based synergies, arising in particular from Network & IT, distribution, marketing and workforce optimisation, are expected to reach an annual run-rate of CHF200 million (€132 million), with cumulative integration costs estimated at CHF140 million (€92 million)
• Significant Capex synergies of CHF570 million (€376 million) are expected between 2010 and 2015 (net of integration Capex) and a run-rate Capex savings of CHF65 million (€43 million) per annum from 2015
The Board of the combined entity will be composed of representatives of TDC and France Telecom, with France Telecom holding the majority of the seats. Thomas Sieber will be the Chief Executive Officer of the combined entity. After successfully having repositioned Sunrise in the market over the last three years, Christoph Brand will continue as Sunrise‘s CEO up until the completion of the transaction. Post-closing Christoph Brand will help supervise the initial integration, before moving on to pursue new executive opportunities outside of the combined entity.
The combined entity will have a share buyback programme targeted at TDC’s 25% stake to be executed at the discretion of the Board using cash generated by the company. If decided, the annual share buybacks will be executed in Q1 of each of 2012, 2013 and 2014, on the basis of pre-agreed multiples applied to prior year EBITDA and determined on the basis of a target net present value of €1.2bn for the full 25% TDC stake.
Furthermore, TDC will have the right to sell its stake to third-parties from the second anniversary of closing or to do an initial public offering of the company from the third anniversary of closing. In addition, France Telecom will have an option to buy TDC’s shares from the first anniversary of closing at a minimum value of €1.2 billion, compounded at a rate of 7% per annum.
In connection with the exit routes, the following mechanism is put in place:
• France Telecom to pay €100m per year to TDC in each of 2012, 2013 and 2014 (representing c. €245 million of NPV);
• Such payment(s) will not occur in the respective year(s) in which the share buyback is implemented, or if the France Telecom call option has been exercised, and
• These payments may be reduced or reimbursable under certain exit scenarios for TDC (exercise of France Telecom call option, IPO or sale to a third party).
Prior to signing the final transaction documentation, which is expected to take place in the second half of February 2010, both TDC and France Telecom will undertake a confirmatory due diligence. The completion of the transaction will furthermore be conditional upon the approval by the relevant competition and regulatory authorities.
The transaction is expected to create substantial value for both shareholders and for France Telecom to be accretive from 2010 in terms of free cash-flow per share and from 2011 in terms of earnings per share. After closing, France Telecom will fully consolidate the combined entity, whilst TDC will recognise its interest in the company using the equity method.
1/ as of end of June 2009
2/ as of end of December 2008
3/ as of end of June 2009
4/ as of end of December 2008
TDC is the leading provider of communications solutions in Denmark with a strong Nordic focus. In the Nordic region TDC has five business units: Business, Operations & Wholesale, Consumer, Nordic and YouSee. TDC’s activities outside the Nordic Region comprise amongst others Sunrise, a leading telecommunications provider in Switzerland. TDC was partly privatised in 1994 and fully privatised in 1998. Nordic Telephone Company ApS owns 87.9% of TDC, with the remainder of the shares held by individual and institutional shareowners.
TDC’s shares are listed on NASDAQ OMX Copenhagen, its Reuters code is TDC.CO and its Bloomberg code is TDC DC.
France Telecom disclaimer
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In addition to figures prepared in accordance with IFRS, FT presents non-GAAP financial performance measures, including, among others, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBIT, adjusted net income, free cash flow, gross debt and net debt. These non-GAAP measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Non-GAAP financial performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways. For further information relevant to the interpretation of these terms, please refer to FT’s Investor Relations webpage at www.francetelecom.com
This presentation (the “Presentation”) has been prepared by TDC A/S (“TDC”) and the information contained herein has been obtained from sources believed by TDC to be reliable. Whilst all reasonable care has been taken to ensure that the facts stated herein are accurate and that the opinions and expectations contained herein are fair and reasonable, no representation or warranty, express or implied, is made by TDC or its affiliates, with respect to the fairness, completeness, correctness, reasonableness or accuracy of any information and opinions contained herein. Any opinion, estimate or projection in this Presentation constitutes an opinion, estimate or projection as of the date of this Presentation, and there can be no assurance that future results will be consistent with any such opinion, estimate or projection or any past projections or outlooks. None of TDC, its affiliates, their advisers, connected persons or any other person accepts any liability for any loss howsoever arising, directly or indirectly, from this Presentation or its contents. The information in this Presentation is subject to change without notice, it may be incomplete or condensed, and it may not contain all material information concerning TDC and its affiliates.
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