The Hungarian government would spend € 200m (HUF 60bn) to get a slice of the telecom market, and that is the estimate that might be paid to acquire Vodafone Hungary, according to Hungarian weekly, HVG. Vodafone Hungary commented that the info from the press was just a rumor.
Our view:
It seems that the government has not given up the chance to enter the mobile market. It would be a cheaper option to buy an incumbent and get access to 2.5m subscribers right away, than building up a new operator,which was the original plan throughout 2011-2012 that could have required €1.1-1.2bn over the next 7 years.
We believe the rumored sum of € 200m (HUF 60bn) would be not enough to purchase the 3rd largest operator in Hungary (22.6% market share in mobile segment), given Vodafone Hungary’s FY 2011 (ended on March 30 2012) EBITDA of HUF 17.3bn (implying 3.5 x EBITDA multiple) and revenues of HUF 119.5bn (implying 0.5x revenue multiple), which would require somewhat higher purchase price (let’s not forget the premium Vodafone can get from a seemingly desperate buyer, the Hungarian government). Nevertheless, if Vodafone Hungary was indeed purchased,
we would expect heavier price competition and the enticement of subscribers from state owned companies, that could hurt MTEL’s margins and market share.