Syn agrees towers sale and lease-back, sells stake in Faroese associate

News General Iceland 1 APR 2021
Syn agrees towers sale and lease-back, sells stake in Faroese associate

Vodafone Iceland parent company Syn said it has signed an agreement for the sale and leaseback of passive mobile infrastructure to international investors, which it did not name. Syn also announced that it has agreed to sell its 49.9 percent stake in its Faroese associate P/F for DKK 52.5 million.

The terms of the passive infrastructure sale agreement indicate a profit of over ISK 6 billion. The transaction will strengthen the balance sheet and improve Syn’s liquidity. Under IFRS, the deal will be treated as a sale and leaseback of the assets. This means the gain will not be recognised from the outset through profit/loss but will instead be proportionate based on the fair value of the asset sold and the present value of expected lease liability. This is currently estimated at around 80-85 percent.

This means that 15-20 percent of the profit will be recognised through the profit/loss at closing and the rest applied towards the right of use assets, to be reflected in lower depreciation over the estimated life of the lease agreement. As the right of use asset will be considerably lower than the lease liability, the effect on EBITDA will be immaterial. The interest expenses on the lease liability will be recognised fully through financial expenses.

The transaction will strengthen the balance sheet and improve Syn’s liquidity. The terms assume a long-term lease agreement guaranteeing Syn access to the passive mobile infrastructure. All active mobile equipment will be owned and operated by Syn. The agreements are subject to approval by the Icelandic Competition Authority, as well as other typical closing conditions

Turning to the Faroese stake sale, Syn said management expects the conditions to be fulfilled in the second quarter of 2021. The current service agreement between Syn and P/F will remain in place after the sale. The transaction has no effect on Syn’s EBITDA but will strengthen its liquidity position.

In 2019, Syn agreed to merge its Faroese subsidiary PF/Hey with Faroese IT company Nema, a subsidiary of Tjaldur. The deal left Syn with a 49.9 percent stake in the merged business and Tjaldur with the other 50.1 percent.

Categories:

General

Companies:

Vodafone Iceland,  Syn

Countries:

Faroe Islands,  Iceland

Tags:

Network equipment, Wireless, M&A buyouts & divestments

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