COPENHAGEN, Denmark, Nov. 13, 2000 (PRIMEZONE) -- Today, Tele Danmark has agreed to increase its stake in Sunrise, the Swiss landline telecom and Internet operator, from 44% to 89%. Tele Danmark has also agreed to also acquire 70% of diAx, the Swiss mobile and landline operator, and then merge the two entities to create the undisputed number-two telecom operator in Switzerland. The combined entity will be majority owned and controlled by Tele Danmark.
-- The acquisitions increase Tele Danmark's exposure to high growth
businesses: mobile and Internet
-- The new structure is expected to accelerate the EBITDA growth of
the Tele Danmark Group
-- The transaction optimizes the capital structure, while preserving
a strong credit rating, expected to remain at A+ or better with
S&P and a 1 or better with Moody's
-- The merged company will benefit from Tele Danmark's innovative
communication, marketing and management resources
-- The acquisitions are based on a total equity value of the merged
company of CHF 5.4bn (DKK 26.5bn)
-- The price paid by Tele Danmark for the stakes in diAx and sunrise
is CHF 3.5bn (DKK 17.2bn). The funding will be in cash and newly
issued Tele Danmark shares. In addition Tele Danmark will
refinance diAx and sunrise for a total of CHF 1.2bn (DKK 5.9bn)
-- The merged company has applied for a Swiss UMTS license
"By acquiring Sunrise and diAx we are delivering on our promise to pursue growth opportunities in European mobile, landline and Internet, and we are building on our record of shareholder value creation in the highly attractive Swiss market. Sunrise and diAx will leverage their existing strong positions to achieve higher growth, pursue a superior strategy and generate substantial synergies," says Henning Dyremose, Chief Executive Officer of Tele Danmark.
The Acquisition
The transaction involves the following steps:
Tele Danmark will increase it's ownership in sunrise from 44.0% to 89.2% by acquiring all of the sunrise shares held by British Telecom (34.4%), and half of the sunrise shares held by Swiss State Railways and Union Bank of Switzerland. Prior to the acquisition Swiss State Railways and Union Bank of Switzerland held 11.8% and 9.8%, respectively. The transaction is based on an equity value of sunrise at CHF 2.4bn (DKK 11.8bn), with an additional compensation being made to British Telecom in relation to the modification of certain commercial agreements.
Subsequently, and subject to final approval by SBC and diAx and approval by authorities, Tele Danmark will merge sunrise and diAx, and acquire SBC's (40%) shares in diAx and up to half of the shares of diAx from diAx Holding (60%). The acquisition is based on an equity value of diAx at CHF 3.0bn (14.7bn).
On the basis of the above valuations, the combined entity will have an equity value of CHF 5.4bn (DKK 26.5bn), and Tele Danmark will end up with an ownership of 78.5%. The consideration offered by Tele Danmark to acquire the various stakes would be made in cash and promissory notes.
The Swiss Telecommunications Market
The Swiss telecommunications market is one of the most attractive and advanced in Europe. Landline penetration stood at 69% at the end of 1999 whilst Internet subscriber household penetration was 23%. Mobile penetration has been growing rapidly and reached 61% at the end of September 2000.
Swisscom is the Swiss incumbent operator and competes primarily with sunrise, diAx and Tele 2 in the landline market and with diAx and Orange Communications in the mobile market.
The Swiss government will begin an auction of four new third generation UMTS licenses today. diAx will bid through dSpeed, a subsidiary of diAx Holding. It is envisaged that the merged company, with its increased financial and competitive strength will be a formidable player within the market for wireless broadband services.
Sunrise
Sunrise, established in 1998, is now the leading competitor to Swisscom in the landline and Internet dial-up markets. Sunrise has an estimated traffic market share of 14% with 577,000 pre-select landline customers and has 312,000 Internet dial-up customers (estimated market share of 24%). Sunrise also has a substantial and growing share of the corporate data services and carrier markets and is positioning itself to swiftly capitalize on local loop unbundling once it becomes available.
With estimated revenues of CHF 590m (DKK 2.9bn) for 2000, Sunrise is close to achieving EBITDA break-even.
diAx
diAx, launched in 1998, operates a Swiss GSM license and had 653,000 mobile subscribers at the end of September 2000 (market share of 15%), as well as 320,000 landline customers (market share of 8%) and 130,000 Internet dial-up customers. diAx has a suite of voice and value-added offerings and a well recognized national brand. diAx will launch a GPRS service in December , 2000.
diAx is expected to report a negative EBITDA margin of around 10% on sales of around of CHF 800m (DKK 3.9bn) this year.
Strategic Rationale
The merger of Sunrise and diAx is an integral component of Tele Danmark's international expansion strategy and will place it in control of the clear number two player in Switzerland, a market for Tele Danmark with many similarities to its home market. The Company will be ideally positioned to capitalize on impending growth opportunities such as UMTS, wireless local loop and the current explosive growth of data services. Furthermore the company's scale and breadth and depth of offerings will provide it with clear competitive advantages over its smaller competitors. The new company will have combined revenues of approximately CHF 1.4bn (DKK 6.9bn) in 2000 and is expected to reach EBITDA break-even during 2001.
In terms of customers, the combined entity will have an estimated 15% mobile market share, 22% landline market share and 36% Internet market share. This position of strength will allow the company aggressively to compete for and win market share across all of its target market segments.
Synergies
The complementary nature of both companies and their relationship with Tele Danmark will generate significant scope for driving shareholder value growth by extracting realistic and achievable synergies.
This combined entity expects to enhance revenue growth by leveraging cross-selling and bundling expertise to sell integrated offerings, such as fixed-mobile integrated products or landline and Internet packages, in addition to exploiting their greater combined presence and scale. Cost synergies are expected to be achieved in a short timeframe through cheaper transmission and termination costs, cheaper procurement, the transfer of best 'practice' processes and by driving efficiencies at all levels of the organization.
Financial Impact on Tele Danmark
The transaction will substantially increase Tele Danmark's consolidated revenues for 2001 and is expected to be EBITDA accretive from 2001 onwards. Furthermore, the transaction is expected significantly to enhance Tele Danmark's EBITDA growth profile through greater exposure to fast growth mobile, Internet and data market segments.
By 2003, Tele Danmark targets the merged company to generate revenues of CHF 2.1bn (DKK 10.5bn) and with a target EBITDA margin of 15%. The targets include a UMTS roll out.
Tele Danmark targets the merged company to achieve synergy benefits of CHF 100-200m (DKK 0.5 - 1.0bn) by 2003. And furthermore the target for the net present value of synergies for the 2001-2009 period is CHF 1.3bn (DKK 6.4bn) plus terminal value of CHF 3.1bn (DKK 15.2bn).
The creation of a major telecom force in Switzerland demonstrates Tele Danmark's commitment to its international expansion strategy and its goal of delivering sustainable shareholder value growth to its shareholders.
Merrill Lynch acted as sole advisor for Tele Danmark.
Forward Looking Statement
Information set forth in this release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties. The factors that may affect future results is contained in Tele Danmark's annual report 1999. Tele Danmark disclaims any obligation to update or revise statements contained in this release based on new information or otherwise.
Conference Call to be Held Today
Tele Danmark invites to a conference call today at 15.00 CET. Henning Dyremose, Chief Executive Officer and Hans Munk Nielsen, Chief Financial Officer will host the conference call. To participate please call +35 21 240 54 24 about 10 minutes before the conference call begin.
The slides to be used as reference from today's conference call are available in English from www.teledanmark.com and www.teledanmark.dk.
Tele Danmark
Tele Danmark is a Danish based European communication solutions provider organized along five main business lines; Communication Solutions, Mobile, Internet, Cable TV and Directories. Tele Danmark is the principal provider of communications services in Denmark and holds significant interests in a range of communication companies across Northern and Continental Europe. The Company was privatized in 1994 and today SBC Communications owns 41.6% of the shares, with the remaining shares held by individual and institutional shareowners all over the world.
TLD Listings Shares: Copenhagen Stock Exchange. Reuters TLD.CO. Bloomberg TLD DC. Nominal value DKK 5. ISIN DK00-1020242-3. SEDOL 4889874. ADRs: New York Stock Exchange One ADR represents half of one ordinary share Reuters TLD.N. Bloomberg TLD US. SEC 1-12998. Half of one ordinary share. CUSIP 879242105. SEDOL 2883094.