IHS Global Insight Perspective | |
Significance | Although the Finance Ministry still has to gain official government cabinet approval, it has confirmed that the state has agreed in principle to the US$484-million sale. |
Implications | The move will increase TeliaSonera's stake in Eesti to 100%, following agreement earlier in September from the Lithuanian Competition Council that it could also increase to 100% its stake in Teo LT. |
Outlook | While proceeding with the buy-out of Eesti, TeliaSonera has declined to comment on rumours that it is once again the subject of interest from France Telecom. |
The Estonian government has decided in principle to sell its shares in national telecom holding Eesti Telekom to 60.12% owner TeliaSonera. The Scandinavian group has offered around 5.12 billion kroons (US$484.4 million), based on a valuation of 93 kroons per share, for the stake it does not currently own. The Estonian Finance Ministry is to make a proposal to the government cabinet session later this week, to agree to TeliaSonera's takeover, but has said in a statement that the state has already agreed in principle to the sale.
Outlook and Implications
Satisfactory News for TeliaSonera: The news has been welcomed by TeliaSonera, which has declared itself "satisfied" with the agreement. Earlier in September the operator was also cleared to increase to 100% its existing 60% stake in Lithuanian incumbent operator Teo LT, after the Lithuanian Competition Council ruled that such a move would not lead to the creation or strengthening of a dominant position or any significant weakening of competition (see Lithuania: 11 September 2009: Lithuanian Competition Authority Greenlights TeliaSonera's Teo LT Buy-Out; Estonian Government Remains Undecided on Divestment). The acceptance period for both offers will close on 9 October. The Estonian state owns 24.0% of Eesti, while the Estonian Development Fund holds 3.0% and 12.7% was held by private investors at the start of the year. Eesti comprises fixed-line unit Elion, the dominant national fixed voice and broadband player, as well as leading national mobile operator Estonian Mobile Telephone (EMT). The bids to increase its stakes in these operators and Teo align with TeliaSonera's strategy in the Baltics, as well as Scandinavia, of improving market efficiency through a shift towards mobile and IP-based services.
Financial Needs Weigh On Estonian State: The Estonian state had previously appeared unwilling to sell its stake, with Prime Minister Andrus Ansip claiming that TeliaSonera's bid was too low and maintaining the country's financial problems were not sufficiently grave to necessitate a sale. However, the country's economy has overheated as the global financial crisis has set in, and as Estonia eyes Eurozone membership income from the sale will bolster its budget position.
No Comment on Rumour of France Telecom Interest in TeliaSonera: While seemingly proceeding with the buy-out of Eesti, TeliaSonera has declined to comment on rumours that it is the subject of interest from France Telecom. Reuters has suggested that the French group is once again eyeing the Scandinavian telco, more than a year since it withdrew a US$40-billion offer for TeliaSonera, after failing to reach agreement with the latter's board of directors on financial conditions (see France: 30 June 2008: France Telecom Withdraws TeliaSonera Offer). With little geographical overlap between the two groups, the main benefit of a merger would be expansion of France Telecom's European footprint. IHS Global Insight considers that there is little practical reason why France Telecom could not renew its interest in TeliaSonera, with the main issue instead being whether the group would have the desire for such a move.