Viasat Consumer, Canal Digital to merge
October 23, 2019
Nordic Entertainment Group (NENT Group), the Nordic region’s leading streaming company, has entered into an agreement with Telenor Group to combine its Viasat Consumer (satellite pay-TV and broadband-TV operations) with Canal Digital (satellite pay-TV).
The combination will result in the parties each holding 50 per cent of the shares of the new joint venture company and is expected to create substantial synergies and shareholder value, as well as provide an enhanced proposition for customers.
- The combination generates a scale Nordic player with combined net sales of approximately SEK 7.6 billion (€708 million) and 1.257 million subscribers at the end of June 30th 2019.
- The combination is expected to yield annual cost synergies of approximately SEK 650 million, with full effect from 2022. Furthermore, there are expected to be substantial sales synergies arising primarily from Viaplay upsell opportunities and reduced churn in the joint entity.
- Integration and other related costs are expected to total approximately SEK 900 million, and will be reported in the new joint venture.
- The joint venture will be reported as an associated company in 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.
According to the pair, the rationale behind a consolidation in the Nordic satellite-TV segment has been clear for a long time. It will provide a simpler and more complete content offering, create substantial revenue and cost synergies, and enable sustained investment to stay competitive. The parties agree that an independent joint venture is the strategically preferred route to capture the synergies and create shareholder value. It will operate on an arm’s length basis from both companies, and will be an open platform providing content from multiple providers.
“We are very happy to announce this game-changing joint venture with Telenor,” commented Anders Jensen, NENT Group President and CEO. “Combining Viasat Consumer and Canal Digital makes perfect sense. We are creating a large-scale TV operator that will create sustainable value for customers and owners, and be able to compete with large scale regional and local competitors. We have achieved complete alignment of interest through a 50/50 joint venture structure and a shared vision for brands, products and how to provide an even better consumer experience. This deal will drive significant shareholder value and it fits perfectly with our strategy to focus on the substantial opportunity we see in the fast-growing streaming sector. The new joint venture will be a major distribution partner for both our Viasat channels and Viaplay.”
“The joint venture will combine the respective strengths of Canal Digital and Viasat Consumer, leveraging synergies for the benefits of our customers and shareholders,” added Jørgen C. Arentz Rostrup, Telenor Group CFO. “There is a compelling business rationale behind combining the DTH operations of Canal Digital and Viasat Consumer, with large synergies to be captured within areas including transponder capacity, IT and operating expenditure. The joint venture will use Telenor Satellite’s services on 1°West for DTH transmission, representing a solid foundation for Telenor Satellite’s broadcast operations.”
Telenor and NENT Group will ensure that the joint venture will benefit from the provision of a suite of services from the two respective partners, including transponder capacity, technology services, content and streaming services.
The combination is expected to achieve annual cost synergies of approximately SEK 650 million, with full effect from 2022. The largest areas of synergies are expected to come from transponders, IT and SG&A related costs. The integration and other related costs needed to achieve these synergies are expected to be approximately SEK 900 million and to be incurred during 2020-2021. This primarily reflects the costs for migrating Viasat Consumer’s subscriber base to the Telenor Satellite platform.
The company will be headquartered in Stockholm and Oslo. The Board of Directors will have an equal representation from Telenor and NENT Group, with a rotating chairmanship. The CEO will be Bjørn Ivar Moen (currently CEO of Canal Digital and Telenor Broadcast), and the CFO and Head of Operations will be Jonas Gustafsson (currently CEO of Viasat Consumer). Other key management positions will be jointly appointed and announced prior to the completion of the transaction.
Telenor and NENT Group recognise that their employees are vital for the success of the joint venture and that the agreement is subject to customary consultations with the respective trade unions.
The joint venture is the latest in a series of measures Telenor is taking to address its business structures and core systems, in order to find and leverage strategic opportunities to modernise and optimise its customer offerings in next-generation networks.
After closing of the transaction, NENT Group will report its share of the net income of the joint venture as income from associated companies within its operating income. The transaction will give rise to a capital gain for NENT Group, which will be reported within Items Affecting Comparability. Upon closing, NENT Group will perform a purchase price allocation which likely will result in the identification of amortisable assets that will impact the income from the associated companies. The amounts are not known at the date of this release but will have no cash flow impact.