Nordic Entertainment Group (NENT) has announced an agreement with Telenor Group to combine NENT's Viasat Consumer satellite pay-TV and broadband television operations with Telenor’s Canal Digital satellite pay-TV arm. Each party will hold 50 percent of the joint venture, and Viasat Consumer customers will migrate to Telenor’s platform. The venture’s combined net sales amount to approximately SEK 7.6 billion with 1.26 million subscribers on 30 June.
The parties said they consider an independent joint venture as the strategically preferred route to capture synergies and create shareholder value. It will operate on an arm’s length basis from both companies, and will be an open platform providing output from different providers. The venture will be financed by its owners and is not expected to have any external borrowings from the start.
The consolidation of the Nordic satellite-TV sector will provide a simpler and more complete content offering, said NENT. It will create substantial revenue and cost synergies and enable sustained investment to stay competitive.
Full synergies from 2022
The combination is expected to yield annual cost synergies of approximately SEK 650 million, with full effect from 2022. There should also be sales synergies arising primarily from Viaplay upselling opportunities and lower churn. Integration and related costs will be approximately SEK 900 million incurred during 2020-21, and will be reported in the new joint venture. The costs are mostly for migrating Viasat Consumer subscribers to the Telenor satellite platform.
The joint venture will have headquarters in both Stockholm and Oslo and will be reported as an associated company of the NENT Group and Telenor, and is expected to distribute available cash to its shareholders. The combination is subject to EU regulatory approval and expected to be completed during the first half of 2020.
Better competitor
NENT group president and CEO Anders Jensen said the joint venture will be able to compete with large-scale regional and local competitors. He said Telenor and NENT have a shared vision for brands and products and how to provide even better viewing. The deal matches NENT’s strategy to focus on the opportunity of the fast-growing streaming sector. The venture will be a major distribution partner for both NENT’s Viasat channels and its Viaplay streaming service, he added
Telenor Group CFO Jorgen C Arentz Rostrup said there is a “compelling” business rationale behind combining the DTH operations of Canal Digital and Viasat Consumer, with large synergies to be captured, such as in transponder capacity, IT and operating expenditure. The venture will use Telenor Satellite’s services on 1 degree West for DTH transmission.
The board of directors will have equal representation from Telenor and NENT and will rotate the chairperson. The CEO will be Bjorn Ivar Moen, currently CEO of Canal Digital and Telenor Broadcast. The CFO and head of operations will be Jonas Gustafsson, currently CEO of Viasat Consumer.
The transaction will generate a capital gain for NENT. After closing, NENT will perform a purchase price allocation which is likely to result in the identification of amortisable assets, which will affect income from associated companies.
