Telenor Montenegro buy is just the start for 4iG

PPF Group is selling Telenor Montenegro just three years after it acquired the business as part of a drive to become a medium-sized European telecoms operator group.

The Czech investment group is working on a deal of undisclosed value to offload the asset to Hungarian ICT company 4iG, which is itself in the process of building up its telecoms portfolio. The firms have inked a preliminary agreement that will see 4iG run due diligence on Telenor Montenegro between now and the end of September, at which point it should be in a position to make a final offer. They aim to complete the deal by the end of November, subject to regulatory approvals.

Telenor Montenegro is a small mobile operator, with 150 base stations serving 338,000 customers and generating €43 million in revenues last year. But the deal is noteworthy because it reflects the telecoms industry ambitions of the parties involved.

PPF got our attention in March 2018, when it brokered a €2.8 billion deal for Telenor’s assets in Hungary, Bulgaria, Montenegro and Serbia, having previously acquired O2 in the Czech Republic and Slovakia.

“With this purchase, PPF Group is expanding its telecommunications portfolio to four more countries, and fulfilling our long-held goal to become a mid-sized European operator and to use our experience to strengthen our market position,” said Ladislav Bartoníček, PPF Group’s shareholder responsible for telecommunications assets, at the time.

That statement seemed to indicate that PPF was not just in it for the returns, but actually sought to be a telco.

Thus, three years on, it’s tempting to speculate that PPF is backtracking from that stance, has remembered that it is an investor not an operator, and is now looking to monetise those assets. But before we start speculating on further telecoms asset sales, it is worth looking at the way the group reorganised its telecoms assets last year, a move that suggests the fate of Montenegro business is likely to be a one-off.

In July last year PPF split its telecoms infrastructure assets from the retail businesses and created CETIN Group to house the infrastructure side. The firm had previously enacted such a separation in the Czech Republic and chose to replicate it across its footprint with a view to building some scale and signing more wholesale deals. The split did not include PPF’s entire footprint though; while its Bulgaria, Hungary and Serbia operations joined the CETIN fold, Montenegro did not. PPF made no comment on that at the time, but now it seems the market is simply not core to its strategy going forward.

That is clearly not the case for buyer 4iG though. The firm is on something of an M&A adventure at present, having inked a preliminary agreement to acquire Hungary’s Digi Group in March and followed that up last month with a deal for a majority stake in Israeli satellite operator Spacecom. And there could well be more to come.

“The acquisition of Telenor Montenegro is in line with 4iG’s regional expansion strategy, and the target’s solid background and market position, as well as its strong revenue generating capacity, can bring high added value to our group,” said Gellért Jászai, chairman and CEO of 4iG. “We see significant growth potential in the Western Balkans region, and we expect that over the next five years, the region’s economic growth could be boosted significantly by the enlargement of the European Union,” he added.

“We therefore intend to further increase our presence in the region, in addition to the acquisition we have just announced. To this end, we are continuously exploring investment opportunities in the telecoms and IT sectors,” he said.

That’s a pretty clear statement: we haven’t seen the last of 4iG in the mergers and acquisitions market.