4iG buys Digi's Hungarian telco assets for €625mn

4iG buys Digi's Hungarian telco assets for €625mn
4iG paid 12 times the EV/Ebitda for Digi's Hungarian unit.
By bne IntelliNews December 1, 2021

BSE-listed 4iG has reached a final agreement with the Romanian consortium RCS & RDS to acquire the Hungarian interests of the Digi Group, paying €625mn for 100% of the shares, it announced on November 30. The transaction, the largest in 4iG’s history, is expected to close in January, subject to regulatory approval.

Digi is runner-up in Hungary's fixed-line telephony, internet and TV market. It also has a reinforced backbone and satellite infrastructure and television channels. It launched mobile telecommunications services in Hungary in May 2019 and delivers outdoor mobile coverage to over 90% of the population with 2,300 of its own base stations.

Pay-TV subscriber numbers fell 3% to 933,000, while its fixed-line internet subscriber numbers were little changed at 749,000. Fixed-line telephony subscriber numbers dropped 5% to 650,000, but mobile subscribers jumped 75% to 173,000 in 2020.

Digi has more than 3,000 employers in Hungary. It had net revenue of HUF55bn (€150mn) last year and adjusted Ebitda of HUF19bn, public records show.

"The acquisition could be an important step in the creation of a national telecoms and telecoms infrastructure company by combining public and private capital, the platform company of which will be Antenna Hungaria (AH)," 4iG said in a statement.

The BSE-listed company announced in August that it reached a preliminary agreement to acquire a majority stake in state-owned telco AH through the in-kind contribution of its telecommunications assets to the company. AH is the exclusive provider of national digital terrestrial television and analogue radio broadcasting in Hungary

The strategic partnership could create one of the leading telecommunications holding companies in the CEE region, with local interests to be complemented by ongoing acquisitions in the Western Balkans, it said.

4iG, formerly owned by Hungary’s most powerful oligarch Lorinc Meszaros, surged from obscurity to the leading IT and communications company in Hungary in a matter of years through lucrative state orders and a myriad of acquisitions. In recent months, 4iG moved to acquire 70% of Bosnia & Herzegovina-based Telegroup, the leading IT systems integrator in the region.

4iG has already expanded directly to the mobile communication market in July, signing a non-binding preliminary agreement with PPF Telecom Group to acquire 100% of Telenor Montenegro, the country's leading mobile provider.

Indirectly, it will become a minority shareholder in Telenor’s Hungarian subsidiary after AH acquired 25% of the stakes in the country’s second-largest mobile carrier from Czechia’s PPF a year ago for HUF100bn.

4iG delivered record numbers last year as revenues rose 39% to HUF57bn, and Ebitda increased by 24% to HUF5bn.

4iG paid 12 times the EV/Ebitda for the stakes, which is significantly higher than the valuation of sector peers. Yet, investors cheered the news. The stock went up 4.3% to HUF946.