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Eltel buys out JV Partner in Norway

Eltel buys out JV Partner in Norway

OSLO: Eltel has agreed to acquire the other half of the JV Eltel Sønnico AS in Norway from its partner Umoe at a price of NOK 265 million. The JV was formed in the beginning of 2014 to join the communication businesses of Eltel and Umoe in Norway. After this acquisition Eltel will be the sole owner of the company.

The joint venture of the communication businesses of Eltel and Umoe´s Sønnico Tele AS was agreed in Q1 2014 and started operations in the beginning of 2015. All other Eltel businesses in Norway are operated within Eltel Networks AS, a wholly-owned subsidiary of Eltel Group. In the end of 2014 Eltel Sønnico won a large framework agreement with Telenor in maintenance and build of fixed and mobile communications for five years. The driver that formed the JV between Eltel and Sønnico was the rapidly changing Norwegian telecom industry.

Telecom operators have been exploring different options to improve cost efficiency requiring that their service providers should take over larger responsibilities for their value chain. An increased production capacity and a wider geographical coverage enabled the JV to meet such requirements. With Eltel becoming the sole owner of the JV, the governance of the company will be aligned with Eltel’s group structure, organization by specialized business units and implementation of Eltel’s operational model, Eltel Way. Hence the integration of the company with Eltel both within Norway and internationally will be enhanced.

The price of NOK 265 million will be paid in cash. The price is in line with Eltel’s stated target range for acquisitions of 5-7 times EBITA measured proforma for the last 12 months. 2/3 of the price will be paid at closing and the remaining 1/3 will be paid in January 2016. Eltel’s net sales will increase with the full amount of the JV’s net sales, slightly below EUR 200 million per annum, while net profit will increase with the Umoe 50% of the total JV net profit.

The impact on Eltel’s operative EBITA-margin will be negative by 0.30-0.35 %-points, should the JV have been fully consolidated in Eltel 2015. The acquisition will be EPS accretive immediately at closing.