After spending a little over four years in Bulgaria, Norway's Telenor is about to withdraw. The buyer of the company's telecommunications business in Bulgaria (the mobile operator with the highest revenue in the country) will probably be the Czech billionaire Petr Kellner. The news that Telenor have chosen his PPF Group to acquire their telecommunications business in Bulgaria, Serbia and Montenegro was confirmed to Capital by three sources standing very close to the negotiations.
Judging from Petr Kellner's business profile, he is not unfamiliar with the two sectors but they are not the core of his business either. An undisputed fact, however, is that two Scandinavian investors are willing to leave - Telenor and Sweden-based entertainment company Modern Times Group (MTG), who have already signed a deal to sell their Nova Broadcasting Group in Bulgaria to PPF Group. They are yet another example of Western European companies which no longer believe that Bulgaria and both sectors are worth the investment.
Briefly about Kellner
Mr Kellner started his business dealing with copiers, and subsequently, during the mass privatization, created the PPF investment fund, which over the years has grown into a huge investment group with diverse interests. Mr Kellner will enter Bulgaria through PPF which manages assets valued at more than 35 billion euro in industries such as banking, insurance, biotechnology, agriculture and real estate. With its various businesses, it is present in many countries such as Russia, Slovakia, China, Romania, the U.S., France, Vietnam and others. Mr Kellner already has some experience in telecommunications since he owns over 80% of O2, the largest operator in the Czech Republic and number three in Slovakia, with over 7 million mobile subscribers in the two countries combined. He is also the owner of Czech Telecommunications Infrastructure company Cetin.
His current steps will not actually be the first business venture of Mr Kellner in Bulgaria. He was present in the shareholding structure of Bulgarian insurance company Victoria, via the joint venture Generali PPF Holding, which entered the country in 2008. Italian insurance giant Assicurazioni Generali owned 51% of the JV and PPF Group held the remaining 49%. Subsequently, the Italians bought the shares of Mr Kellner's group and became a sole shareholder. PPF kept its interests in the sector in Russia and the CIS countries.
The Balkan telecom
Telenor's business in Bulgaria, Serbia and Montenegro has a total revenue of over 740 million euro and over 6.3 million subscribers. It is still unclear whether the potential transaction will also include the division in Hungary, the largest of Telenor's businesses in the region with total revenues of over 475 million euro in 2017. The Norwegian group announced earlier this year that there is a buyer interested in all of its assets in CEE, without divulging any more details. Telenor refused to comment when approached by Capital, saying they did not want to comment on market rumors. PPF spokesperson Zuzana Migdalova also declined to comment.
The final price, which naturally will depend on the inclusion of the Hungarian business in the transaction, is not known either. According to the specialized media outlet Mergermarket, Telenor's in Bulgaria, Serbia and Montenegro is estimated at tow billion euro.
Negotiations between Telenor and PPF are now under way, which, according to the information provided by the seller, are expected to close in the first quarter. Then permission from local regulators will be needed. In Bulgaria, the competition authority has a little over a month to announce a decision. Therefore, the payment of the price and the share transfer may happen in early summer.
On the Bulgarian market, this change in ownership will lead take the telecommunications sector farther away from the global majors. BTC, the largest telco by revenue in Bulgaria operating under the Vivacom brand, is controlled by the Bulgarian national Spas Rusev, while Mobiltel is under the control of the Mexican billionaire Carlos Slim via Telekom Austria.
When you have money
The PPF Group has sufficient free capital after the deal for the purchase of the Pilsner Urquell Brewery from SABMiller failed some time ago. The profit of the Netherlands- registered group grew by almost 20% year-on-year in the first six months of 2017 to 293 million euro. In the last few months, the conglomerate bought several companies in different countries. In November, it paid about 400 million euro for the famous Czech rolling stock manufacturer Skoda Transportation and it is going to acquire a huge property asset in Bucharest for 90 million euro, as well as a Romanian gas company. The group continues to expand its successful consumer credit business in China under the Home Credit brand.
PPF's Chinese ties also spark speculation. Some time ago Kellner was said to be willing to sell his stake in O2, with the rumor being that he was negotiating the sale with CEFC, the same Chinese company that is reportedly interested in the business of Central European Media Enterprises (CME) in the region which includes bTV in Bulgaria. For a financial investor such as PPF, the future exit from the telecommunications or television business is highly likely. It is reassuring that the companies acquired by his group have continued to develop after the purchase. And if a resale of the Bulgarian assets is going to follow, the greatest risk is that they may become property of representatives of behind-the-scene circles in Bulgaria, for which regular profits are not important, while influence and information are what matters.