Grossfusion on the Swiss telecom market: Sunrise takes over UPC Switzerland and pays 6.3 billion francs. This is intended to create a stronger challenger for Swisscom.
Sunrise and UPC Switzerland are two companies that complement each other to a certain extent. Sunrise is strong in mobile communications, UPC in the Internet and TV business. To date, UPC Switzerland has been owned by the British cable network giant Liberty Global.
The transaction strengthens Sunrise's position as a strong number two in mobile, TV, broadband Internet and fixed line telephony, the company said Wednesday night. UPC Switzerland is an "attractive supplement" with high-speed broadband Internet and its own TV content and a 1
Sunrise boss Olaf Swantee sees the takeover as " big chance". This will give Switzerland a stronger telecom provider with a very good infrastructure – consisting of the cable network of UPC and the 4G and soon also 5G mobile networks of Sunrise. @libertyglobal sells UPC Switzerland for CHF 6.3 Billions of @Sunrise_en . The result is a new, strong challenger in the Swiss market with first-class fixed and mobile network infrastructure. https://t.co/Romymmfz1X
– UPC Switzerland (@UPC_Switzerland) 27. February 2019
"We want to move the market with it," he said on Wednesday evening to the news agency AWP. The new Sunrise wants to be a major challenger to Swisscom.
In terms of numbers, Sunrise, including UPC, has a market share of 24 percent, broadband Internet 30 percent, and television business 1.4 million TV customers 31 Percent.
For this, Sunrise takes 6.3 billion francs into his hands and will also spend new share capital. Concretely, Sunrise will take over part of the outstanding UPC debt at 3.6 billion Swiss francs.
Sunrise is financing the remaining part of the 2.7 billion purchase price by issuing a rights issue worth 4.1 billion Swiss francs. This one goes in cash to Liberty Global. The remainder repay existing debts of $ 1.1 billion.
Sunrise expects the deal to close in the second half of 2019. The approval of the competition authorities is expected in the second or third quarter of 2019. Panagiotis Spiliopoulos, Head of Research at Vontobel, can not imagine 20 minutes later that the authorities have an objection to the merger.
The combined company Sunrise / UPC would have achieved a turnover of CHF 3.17 billion in the financial year 2018. Together, the number two in the industry comes up with adjusted operating income EBITDA of 1.24 billion.
Compared to Swisscom, however, the new company is still a small fish. The industry leader generated just under 11.7 billion Swiss francs in sales and operating profits of 4.2 billion last year.
Synergy and job cuts?
Buyer Sunrise expects the deal to bring synergies at a cost and investing 190 million francs annually from the third year after completion of the transaction. In addition, earnings synergies of around 45 million Swiss francs will come into effect as from the fifth year after the takeover.
Sunrise CEO Swantee did not yet say what the synergies meant for the employees. "It's too early for that." He said, however, that the impact on the actual service departments and sales teams would be moderate. In contrast, a reduction in management and in the administration is to be expected.
At UPC it was said that one could assume that there would be a reduction in duplication. "How this works is still open. The process should be transparent and fair. The posts should be filled with the best people, "said spokeswoman Alexandra Bini. The extent of the degradation is not yet known. This is in the hands of Sunrise.
Sunrise is better
Simultaneously with the acquisition, Sunrise published the figures for the financial year 2018. Sales rose by 1.2 percent to 1.88 billion Swiss francs , Adjusted operating profit EBITDA shrank slightly by 1.1 percent to 601 million Swiss francs.
The bottom line was a net profit of 107 million. In the previous year, 505 million francs had still rung in the cash register, which was due to the sale of 2200 antenna masts. This had contributed 420 million francs. Excluding mast sales, net profit increased by 3.4 percent in 2018.
UPC was less well on the way. In the financial year 2018, it suffered a decline in revenue of 3.7 percent to just over CHF 1.30 billion. The reason for this is the tougher competition and customer development in recent quarters. Operating profit has fallen sharply.
Over the past 12 months, UPC has lost a significant number of customers. The biggest bloodletting was in the TV business. And towards the end of the year, the decline has accelerated. In the fourth quarter, UPC's revenue shrank by 5.1 percent.
Sunrise also expects UPC 2019's financial performance to be negative again and to be near 2018 levels. However, the new owner believes that UPC's situation will stabilize thereafter and points to operational measures such as a new TV video platform and bundled offerings.
(fss / chk / sda)