Vodafone to sell Hungarian business for $1.8bn

Vodafone has agreed to sell its Hungarian business for $1.8bn, in a deal that will help to streamline its global operations and allow it to reduce debt.

The UK-headquartered telecoms group said on Monday it had entered into a non-binding agreement to sell 100 per cent of its business to 4iG and Corvinus Zrt, a Hungarian state holding company.

Vodafone’s strategy has been under scrutiny since January, when it emerged that Cevian Capital, Europe’s largest activist investor, had taken a stake and was pushing for a simplification of the group’s sprawling business and for the sale of poorly performing businesses.

Nick Read, Vodafone’s chief executive, has been vocal about his ambition to gain scale and pursue mergers and acquisitions in important markets, such as Spain, Portugal, Italy and the UK. The extra cash from a sale of its Hungarian business would help reduce its net debt, which stood at €41.6bn in March.

The combination of Vodafone Hungary and 4iG will create the second-largest mobile and fixed operator in the central European country, making it a stronger competitor to the incumbent Magyar Telekom, a subsidiary of Deutsche Telekom.

“This combination with 4iG will allow Vodafone Hungary, which has a proud history of success and innovation in the country, to play a major role in the future growth and development of the sector as a much stronger scaled and fully converged operator,” Read said in a statement. “The combined entity will increase competition and have greater access to investment to further the digitalisation of Hungary.”

The sale price of Ft715bn ($1.8bn) is more than 9 times Vodafone Hungary’s adjusted earnings before interest, tax, depreciation and amortisation for the 12-month period ending in March. Vodafone’s services business, VOIS, is not included in the transaction and will continue its operations in Hungary.

Last month, Vodafone said it was on track to deliver its full-year guidance, expecting adjusted earnings to be between €15bn and €15.5bn before interest, depreciation, tax and amortisation. Total group revenue in the past quarter edged up to €11.3bn, from €11.1bn a year earlier.

In May, Emirates Telecommunications Group announced that it had acquired a 9.8 per cent stake in Vodafone for about $4.4bn, one of the largest investments it had made in more than a decade. The state-controlled investment group, whose chief executive spent 17 years in senior positions at Vodafone, voiced support for the company’s management and strategy.

The company’s share price remained flat in early morning trading on Monday, but has gained 6 per cent this year, to 122p.