Further M&A opportunities are being pursued elsewhere, but could be met with opposition
The transaction will reshape Hungary’s telecoms market: On 22 August 2022, Vodafone announced that it had agreed non-binding terms with 4iG and Corvinus (a Hungarian Government holding company) for the sale of Vodafone Hungary for HUF715bn (€1.8bn). According to Vodafone CEO Nick Read, merging the operator’s Hungarian unit with 4iG will increase competition by creating a stronger rival to challenge incumbent operator Magyar Telekom, which is majority-owned by Deutsche Telekom. The deal would lead to a reduction in the number of standalone mobile operators from four to three as 4iG would have a controlling stake in both Vodafone and Digi. However, the latter’s market share is currently under 2%, with less than 200,000 connections compared with Magyar Telekom’s 5.1m. Vodafone’s shared services business (VOIS) is not included in the transaction and will continue to provide services to Vodafone’s other operating companies. The parties are targeting completion by the end of 2022, although the deal is subject to the usual regulatory approvals.
Acquisitions have driven 4iG’s recent growth: 4iG is Hungary’s leading IT systems integrator with significant interests in European satellite and telecoms markets. The firm is currently expanding its portfolio and footprint, and is aiming to build a strong market position across a wide range of ICT services. During this expansion phase, it has already acquired Digi’s Hungarian operations, One Montenegro and Albania’s ONE Telecommunications and ALBtelecom, as well as domestic infrastructure company Antenna Hungaria. The combination with Vodafone Hungary therefore aligns with 4iG’s ambitious growth strategy, which is largely inorganic in the short-term. It will establish a stronger converged fixed-mobile operator (supported by broader ICT capabilities and network assets), while also delivering the Hungarian Government’s vision for a scaled national champion.
Vodafone is under pressure to seize consolidation opportunities: Vodafone considers that the combination of its infrastructure with 4iG is complementary, with limited overlaps that might otherwise worry Hungary’s competition authority, the GVH. It is well-known that Vodafone has been actively exploring M&A opportunities across a number of its major European markets (e.g. Italy) – and it remains under pressure from certain investors to strike deals. During the telco’s latest financial results call, Read refused to be drawn into discussing merger rumours, only confirming that there is “a lot going on behind the scenes”. Speculation has been rife regarding a potential tie-up between Three and Vodafone in the UK, where Three’s CEO has described the mobile market as “dysfunctional” and “overcrowded”. However, unlike in Hungary, a proposed merger with Three in the UK would face more resistance.
