Vodafone flogs Hungary unit to systems integrator 4iG

UK-based Vodafone’s bid to slim down and focus on its core markets has taken a €1.8 billion step forward.

The telco on Monday agreed to sell 100 percent of its Hungarian unit to a pair of buyers: local systems integrator 4iG and state-owned holding company Corvinus. The all-cash deal will see them take stakes in Vodafone Hungary of 51 percent and 49 percent respectively. The transaction is expected to close, subject to due diligence and the usual regulatory checks, by the end of this year.

The deal marks a major change in trajectory for 4iG, which until now has generally focused on the IT networking and services sectors, specifically consultancy, security, and data centres. With the addition of Vodafone Hungary’s mobile and fixed-line operations to its portfolio, 4iG has entered a whole new, albeit related market, becoming part of this trend of closer alignment between telecoms, IT and cloud.

In a statement, 4iG said the deal creates significant potential for cross-selling opportunities, full fixed-to-mobile convergence, and scale, resulting in major B2B and B2C revenue synergies. It also positions 4iG and Corvinus to play key roles in the digital transformation of the Hungarian economy.

“The acquisition of Vodafone Hungary will be the most significant domestic telco transaction in the last thirty years, of a similar extent to the privatisation of [former state-owned monopoly] Matáv after the regime change. The acquisition will create a predominantly Hungarian-owned group of infocommunications companies and a clear number two operator in the Hungarian market,” declared 4iG chairman and CEO Gellért Jászai in a statement.

“Following the successful completion of the acquisition, our group will have one of the largest digital infrastructures in Hungary, which, due to its prominent role, will become a significant player in Hungarian telecommunications for many decades to come,” he added.

“The Hungarian government has a clear strategy to build a Hungarian-owned national champion in the ICT sector,” said Vodafone CEO Nick Read, in a separate statement. This combination with 4iG will allow Vodafone Hungary, which has a proud history of success and innovation in the country, to play a major role in the future growth and development of the sector as a much stronger, scaled and fully converged operator. The combined entity will increase competition and have greater access to investment to further the digitalisation of Hungary.”

The deal might also ease the pressure on Read, who has faced calls from investors led by activist shareholder Cevian Capital to offload chunks of the business – as well as monetise infrastructure unit Vantage Towers – in an effort to boost Voda’s share price.

A report earlier this year claimed that investors were growing frustrated with Read due to the apparent lack of progress on any deals, but the sale of Vodafone Hungary will surely temper that frustration, right?

Well, probably not, actually.

Getting rid of the Hungarian operation is unlikely to move the needle in any significant way when it comes to Vodafone’s balance sheet. When it comes to financial KPIs, Hungary is lumped in with ‘Other Europe’, which also includes Portugal, Ireland, Greece, Romania, Albania and the Czech Republic. Collectively, these opcos generated revenue of €2.84 billion in the second half of Vodafone’s fiscal 2021-22. By way of comparison, Vodafone’s Italian and Spanish arms – which are routinely mentioned as potentially being up for sale – turned over a combined €4.61 billion over the same period.

Operationally, Vodafone Hungary was doing OK too. It had 3 million mobile customers at the end of fiscal Q1 2022-23, broadly flat compared to the year-ago quarter. According to the most recent market share stats from Hungary’s telco regulator, the National Media and Infocommunications Authority (NMHH), Vodafone had a 29.4 percent share of the market at the end of last year, putting it in second place behind Magyar Telekom (41.7 percent), but ahead of Yettel (26.4 percent). It’s a similar picture in the fixed broadband market. The watchdog’s most recent stats – from August 2021 – places Vodafone third with a 21 percent share of the market. Magyar leads with 39.8 percent, followed by DIGI with 22.2 percent.

So, while Vodafone Hungary was not exactly running away with it, it was ticking along quite nicely. If Read really does want to sate Cevian’s appetite, he will probably need to serve up something much bigger.

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