Infra funds likely to circle Bulgarian fibre giant

  Bulgaria | 26 Jun 2019
Shareholders in Vivacom have launched a sale of the fast-growing and market dominant Bulgarian telecommunications and broadband specialist, in a deal expected to attract infrastructure funds, sources said.

The company’s owners, Bulgarian businessman Spas Roussev, who owns a 46% stake, Russian bank VTB, Bulgarian investor Delta Capital Investments and European fund manager Mezzanine Management have hired Lazard for a sale of all shares in the business. Teasers have also been issued in recent days.

Sofia-headquartered Vivacom, which reported annual adjusted EBITDA of EUR 183.9m in 2018, owns a fibre-optic broadband network which connects to 1.2 million households. It is also a mobile phone operator with 3.1 million customers across Bulgaria. A source with knowledge of Vivacom said the business is likely to command around a 10 times EBITDA multiple.

The sale takes place as Macquarie is selling its Czech broadcasting towers and broadband company Ceske Radiokomunikace (CRA), in a process that is expected to attract interest from Antin Infrastructure, Partners Group and ADIA and GIC-backed Cellnex. All of these investors are potential bidders for Vivacom, sources said.

CRA’s owner Macquarie owns other telecoms businesses in central and eastern Europe, including Polish fibre-to-the-home network operator INEA and its Slovakian telecoms towers owner Towercom. Other infrastructure owned companies include Alinda Capital Partners owned Polish telecoms towers company Elinda, while in 2017 Infracapital alongside Finnish telecoms giant Nokia invested in the EUR 2.4bn Digital Poland Broadband Programme, which aims to build a fibre broadband network in 13 regions across the country.

Vivacom also owns the Plana Teleport, a 48,000 square meter satellite broadcasting and transmission site with 50 antennae, which sends signals for 200 radio and television channels across Europe and Africa.

The group acquired in 2016 InterV Investment, the parent company of Vivacom, for an enterprise value of EUR 689m, or four times adjusted EBITDA of EUR 169.5m.

It is not known why the owners are selling at this time, but Moody’s has said that there was “uncertainty about the company’s long-term shareholders' strategy and ownership”, in the ratings agency’s March credit opinion of the business.

The current high interest in recent telecoms deals in the region, such as the sale of CRA, could also be a reason for Vivacoms’ owners selling at this time. A source following the deal said that Macquarie’s sale of CRA could command an EBITDA multiple of around seven times.

Vivacom owns Bulgaria’s largest fibre-optic broadband network. It started the rollout of fibre-to-the-premises broadband in 2011 and has now connected 1.1 million households in 25 cities across the country.

The business is also the nation’s third largest mobile operator with a 30% share of the Bulgarian market in terms of revenues, behind only PPF Fund-owned Telenor, with a 37% share, and A1 Bulgaria, with a 33% share. Vivacom has achieved a “significant increase” from the 15% share it reported in December 2010, according to Moody’s.

Vivacom’s financial growth is set to continue. In 1Q 2019, the business reported adjusted EBITDA growth of EUR 57.2m, a 30.5% increase compared to 1Q 2018.

by Nicholas Krause