The move by Tele2 to bid for Song Networks reflects a wider trend in the Scandinavian telecoms sector. Telcos in the region are moving towards increased M&A activity as cut-throat competition leaves little scope for organic growth. Song looks like being an attractive target for a number of players, and there is little doubt it would be a major asset for Tele2 should it win the takeover battle.
Tele2 has joined the contest to buy Song Networks Holding.
Tele2, a Stockholm, Sweden-based pan-European telecoms carrier, has entered the takeover battle for Song Networks Holding, a move that could trigger a bidding war for the Internet access provider.
Last week, the Danish incumbent carrier TDC offered DKK3.3 billion ($541.7 million) for Song Networks. According to reports, the offer had received the backing of Song Networks’ board, and about a third of Song Networks’ shareholders.
Despite this, Tele2, Sweden’s second-largest telephone company, decided to place a higher bid of SEK4.4 billion ($595 million) for Song. It offered SEK75 ($10.14) for each Song Networks share; this bid is 7.1% higher than TDC’s offer. Tele2 also revealed that it has bought 5.3 million shares in Song, which corresponds to 9.5% of the capital and 10.1% of the votes.
Nordic phone companies are expanding mainly through acquisitions as competition in the saturating Nordic telecom market forces price cuts and leaves little scope for growth. Song Networks is proving to be an attractive target because of its position in the Nordic broadband Internet access market. Song has 14,300 business customers that use its network in Denmark, Sweden, Norway, and Finland.
Song has 850 employees, and in its last financial year recorded a net profit of SEK35 million ($4.7 million), up from a loss of SEK2.3 billion ($309 million), on revenue down 3% at SEK 2.26 billion ($306.1 million).
The acquisition of Song would have two benefits for Tele2. First, it would give Tele2 a profitable access to the residential DSL base in the Nordic countries. Second, it would strengthen its business offering in Sweden and enhance its business product portfolio in Denmark, Norway, and Finland.