Did Tele2 NL just put its fixed-line consumer unit up for sale?

Monday 19 June 2017 | 18:20 CET | Market Commentary
Consolidation in the telecoms sector continues. Telenet just received approval for taking over SFR BeLux from Altice and may have its eyes on Voo next. In France, Bouygues Télécom's future as an independent operator is still being contested and O2 UK appears to be a candidate for either a takeover or an IPO. In the Netherlands, rumour and speculation will not cease to exist as long as T-Mobile NL and Tele2 NL continue as independent operators.

At the recent analyst day, focusing on the Netherlands and Kazakhstan, Tele2 was of course asked whether the fixed-line consumer network could be sold. If we take the management's answer quite literally, we could conclude that indeed the unit is in fact for sale.

So how do we arrive at this conclusion? Well, obviously the management was very positive about the unit, serving consumers based on a VULA agreement with the incumbent, KPN. It's most important argument to hold on to it however was its cash generation, linked to the build out of its mobile network. Taken as such, it makes sense as a form of cross subsidisation. However, selling the unit has the exact same effect financially, except that a sale would discount all future cash flows and bring them forward. This could in fact be a bonus, since Tele2 NL is working hard toward completing its network by mid 2018. Having the cash flows from the consumer fixed-line unit all at once would enable Tele2 to accelerate the roll out.

In other words, cash generation for cross-subsidisation can never be an argument for hanging on to a unit that has no further strategic value. Add to this that Tele2 NL explicitly does not pursue a multiplay strategy on the consumer market, instead focusing in its marketing on the opaqueness and high pricing of competitor multiplays. T-Mobile NL, having returned to the fixed-line market by acquiring Vodafone NL's 'at home' (Vodafone Thuis) unit, is easily singled out as the prime candidate for an offer. Combined, the fixed line units would have just over half a million subscribers, giving it some much needed market share and scale.

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