Czech private financial group PPF is in talks to sell a controlling stake in Yettel Bulgaria, the country's biggest operator in terms of mobile service revenue in 2022, to the Emirates Telecommunications Group Company (Etisalat), the Capital Weekly learned from several independent sources. The negotiations started in June directly with Etisalat and if a deal is struck, it will be disclosed at the end of the summer.
A possible deal will also include the telecommunication assets under the Yettel brand in Hungary and Serbia, as well as part of PPF's telecommunications business in Slovakia, but not in the Czech Republic. PPF's CETIN telecom infrastructure business in the four countries is also part of the talks. The potential transaction does not include bTV media group that is part of PPF's portfolio in Bulgaria, according to the sources.
The information was confirmed by the Czech group. "PPF Group and Emirates Telecommunications Group Company are in the early stages of negotiations to form a potential partnership through which they will explore various opportunities for strategic cooperation in Central and Eastern Europe (excluding the Czech Republic) that are mutually beneficial for both business groups," PPF spokesperson Leos Rousek told the Capital Weekly.
It is not yet clear what type of investment the two parties are discussing. According to Capital's sources, the potential deal concerns a controlling stake, i.e. at least 25% each in Yettel and CETIN. PPF will probably remain a shareholder.
The due diligence process is expected to be completed within a month or two with a price offer and a tentative agreement. A possible deal will also have to be approved by the relevant anti-trust bodies.
From the Middle East to Europe
If the negotiations are completed successfully, Etisalat, operating as Etisalat and e&, will make its first investment in Europe since its establishment in 1976 as a telephone operator. The group currently has more than 162 million subscribers in 16 countries in the Middle East, Asia and Africa and is the second largest telecom in the region after Saudi Telecom.
Majority owner of the company is the government of the United Arab Emirates (60%), the remaining 40% is in free float on the Abu Dhabi Securities Exchange. In 2022 the telecom operator booked a 14.3 billion dollars turnover and a 2.7 billion dollars profit. Its market cap is nearly 53 billion dollars. More than half of the group's revenue comes from the UAE but that market has been slowing down. Etisalat's growth is driven by its international operations, mainly in Egypt and Morocco, and Europe would be a favorable diversification.
A deal with PPF would be the second major investment from the Middle East into Central and Southeastern Europe. A few months ago, Saudi TAWAL, an infrastructure division of Saudi Telecom, agreed to buy telecommunications towers in Bulgaria, Croatia and Slovenia from United Group's Vivacom.
Five years later
When it made its investment in Bulgaria in 2018, PPF said it would stay in the region for long. The Czech group then acquired the telecommunications business of Norwegian giant Telenor in Bulgaria, Serbia, Montenegro and Hungary. The entire deal was valued at 2.8 billion euro. In 2021 the Czech group sold the Montenegrin business to Hungary's 4iG Nyrt.
In 2019 PPF bought one of the two large private TV operators in Bulgaria, bTV. That was part of a package deal for five TV groups in Bulgaria, Romania, the Czech Republic, Slovakia and Slovenia, which the company acquired for 2.1 billion dollars from Central European Media Enterprises (CME).
Both Yettel and CETIN yield good revenues. The Bulgarian mobile business reports the strongest turnover growth among the Yettel companies: 6.8% to 456 million euro in 2022. CETIN's sales also increased: by 11% to 113 million euro.
PPF is owned by the Kellner family and managed by CEO Jiri Smejic, a longtime investment partner of the Czech company's late billionaire founder Petr Kellner. PPF has assets worth 42 billion euro in sectors like telecoms, financial services, media, real estate and biotechnology.