United Group has announced its Slovenian subsidiary Telemach has signed an agreement with Garnol, the owner of rival T-2, to acquire a 98.06% stake, saving it from bankruptcy and settling T-2’s EUR90mn debt with the Slovenian State Holding (SDH).
SDH, a Slovenian fully state-owned company managing state assets, will receive a payment in the amount of EUR37mn initially, and the remaining EUR53mn will be transferred to SDH by the end of July 2027. The agreement marks the end of a 10-year long dispute between SDH and T-2’s debt repayment to the state asset manager from loans that the MNO received from state banks years ago.
Initially, Telemach Slovenia will acquire a non-controlling stake of 24.9% of T-2’s equity. After obtaining approval from the relevant regulators, Telemach Slovenia is set to acquire 98.06% of the shares in T-2 as per the terms of the signed share purchase agreement with Garnol.
"Today's agreement ensures a competitive future for T-2, which was compromised due to the threat of bankruptcy. This acquisition strengthens our capacities for further investment in the most modern mobile and fixed telecommunications infrastructure, advanced technologies, and innovative products and services. We are convinced that industry consolidation is crucial to maintain competitiveness in the Slovenian market and to advance digitalization and connectivity, which will strengthen the Slovenian economy in the long term.", said Telemach CEO Tomislav Cizmic.
Recent MNO consolidation proposals in Europe have been thoroughly investigated by national and European authorities which has led to deals taking longer to complete. While the Orange and MasMovil’s consolidation in Spain in early 2024 and UK’s Three and Vodafone proposed merger are different in size and scale to compare to Slovenia, the proposed deal will surely be examined very carefully prior to getting regulatory approvals.
Telemach Slovenia signed a contract of intent to purchase T-2 in mid-June and announced that upon taking over the majority stake, it would ensure that T-2 would fulfill its obligations, including the obligation to SDH. According to Slovenian media RTV Slo, businessman Jurij Krč, who through Garnol is the majority owner of T-2, has managed to convince authorities that the company will continue to be able to successfully develop its potential on the Slovenian market and that Telemach's takeover is essential for employees, customers and business partners.
T-2 was founded in 2004 and according to data from the Agency for Communication Networks and Services (Akos), has a market share of seven percent in mobile telephony, 21.9% in broadband Internet access, and 32.7% in IP TV. It reported EUR115.6mn in revenue and EUR5.9mn in net profit last year.
Telemach which was founded in 1999 became part of United Group in 2013 and at present has a 25.74% share in the mobile telephony market in the country.
What does the deal mean for the market
"For our clients, nothing will change in the future, all terms of business and relations with customers remain unchanged," said Robert Erzin, president of the management board of T-2.
If approved, the combined company from the two MNOs would have approximately 33% market share of mobile telephony in Slovenia. That will make it second in terms of market share standing behind DT-owned Telekom Slovenije which has 37.0% and ahead of A1 which has 30.5% share. While the new consolidated market share doesn’t break the balance in mobile networks, Telemach is already the largest provider of fixed broadband with a third of the market share. Together with T-2, it would have a 55% market share, which will not make the competition watchdog happy with the proposed takeover.
Unlike A1 and Telemach, T-2 has not carved out its telecom towers. United Group has not responded to TowerXchange’s request to comment but TowerXchange estimates that the MNO owns approximately 300 towers which would put United Group back in the managing passive infrastructure business (which it was active in prior to spinning off and selling its Slovenian assets to TAWAL alongside those in Bulgaria and Croatia in 2023).
In addition to gaining market size and scale in fixed, mobile and TV services, United now also has the opportunity to carve-out and sell T-2’s towers in Slovenia. Towerco multiples may have gone down since their peak of 27x but they’re still around the 20x mark and investor appetite is there.
