Swedish telco group Telia has bowed out of the international carrier services market.

The company on Tuesday announced it has agreed to sell Telia Carrier to Swedish pension investment vehicle Polhem Infra for the princely sum of SEK9.45 billion ($1.06 billion). Telia and Telia Carrier have established a long-term strategic partnership to ensure they can still serve wholesale and enterprise customers effectively.

“The divestment of Telia Carrier highlights the value Telia has built in its digital infrastructure – and today we are able to crystallise some of that value,” said Telia CEO Allison Kirkby, in a statement. “As a consequence, we can now fully concentrate on our Nordic and Baltic footprint, while we at the same time have secured future access for our customers to Telia Carrier’s world-leading solutions.”

For years now the international carrier services market has been characterised by downward pressure on prices, termination rates and roaming fees – as well as a fall in volume of wholesale voice traffic – driven by regulation and the rise of free or extremely cheap, Internet-based comms providers.

A quick scan of Telia’s financial reports shows that between 2015 and 2019, revenue at Telia Carrier fell by 18.2 percent. Carriers are working their socks off to offset declines in their legacy markets by rolling out services to global hyperscalers and OTT players, but judging by Telia Carrier’s books, they have yet to reach an inflection point.

The value then is in Telia Carrier’s reach and the capability of the underlying infrastructure. Given that people and businesses are only going to use more and more data going forward, it makes sense that pension funds on the look out for long-term bets would be interested.

“We see it as a long-term investment in digital infrastructure, one of our core areas,” commented Mikael Lundin, CEO of Polhem Infra, in a separate statement.

The cash and debt free deal will see Telia book a SEK7 billion capital gain at closing. Crucially for Telia’s investors, it has enabled the company to reinstate its 2019 full-year dividend to SEK2.45 per share. Telia was forced to cut its payout in March this year to SEK1.80 per share after coronavirus lockdown measures saw revenues plunge at its TV and Media division. Its cash reserves have since been boosted though: in addition to today’s deal, Telia in June sold its Turkcell stake for SEK4.72 billion.

“The majority of the proceeds from the [Telia Carrier] sale will be used to strengthen our balance sheet and thereby provide a solid financial base for Telia Company and our shareholders, enabling both investments in services and networks in our core markets as well as providing a strong foundation for attractive shareholder remuneration,” Kirkby said.

As for Polhem Infra, it is now the proud owner of 67,000 km of directly-owned fibre backbone, and 320 PoPs. “Telia Carrier transports a significant amount of all public Internet data traffic. Telia Carrier is one of the leading companies in the world in this industry. This digital infrastructure is a national asset that Polhem Infra will own,” Lundin said.

Polhem is jointly owned by a group of Swedish national pension funds: First AP Fund, Third AP Fund and Fourth AP Fund. They form the country’s income-based pension scheme, funded by taxpayers. “With Polhem Infra, Telia Carrier gets a long-term stable owner with digital infrastructure as a core area. Polhem Infra’s long-term perspective gives stability for customers, employees and society,” Lundin said.