Swiss bar to merger stalls TDC share sale

The private equity owners of TDC, the Danish telecoms company that was Europe’s largest leveraged buy-out when purchased for €13bn in 2005, have delayed a large share sale.

The TDC share sale, expected to be one of the largest in Europe this year, had been due to take place in the first half but is now scheduled for the second half, said people familiar with the situation.

The main reason for the delay is a decision by Swiss regulators to block a proposed merger of TDC’s Swiss mobile phone business with another owned by France Telecom.

The volatile state of European equity markets, partly prompted by the Greek financial crisis, has also contributed to the delay.

TDC’s private equity owners began a strategic review of the company last November. Although no review outcome has been announced, it is widely expected to conclude in a share sale.

Nordic Telephone Company, controlled by Apax Partners, Blackstone, Kohlberg Kravis Roberts, Permira and Providence Equity Partners, owns almost 88 per cent of TDC.

Shares in TDC, which retains a small free float, closed down 1 per cent at DKK222, giving the company a market capitalisation of DKK44bn ($7.5bn, €5.9bn).

The private equity owners and TDC, which issues first-quarter results on Friday, declined to comment.

Under private equity ownership, TDC has pursued a strategy of selling assets outside its core Nordic operations, including those in Austria, Germany, Hungary and Poland.

Last month’s decision by Swiss regulators to block a proposed merger between France Telecom’s Swiss mobile business and another owned by TDC has upset the Danish company’s strategy.

Its Swiss mobile business is the company’s last remaining asset beyond the Nordic region.

It is difficult to embark on a TDC share sale until the uncertainty surrounding the future of the Swiss mobile unit is resolved, said people close to the matter.

France Telecom and TDC are expected to appeal against the Swiss regulator’s decision but could also propose concessions in a modified deal structure in the hope that it may have a better chance of approval, these people said.

The Swiss regulator rejected the merger because of concerns about the negative impact on competition.

The regulator’s decision took France Telecom and TDC by surprise but the merger was always at risk of rejection given that it would reduce the number of Swiss mobile network operators from three to two. Most European countries have three or four network operators.

TDC’s Sunrise unit is Switzerland’s second largest mobile operator and France Telecom’s Orange is in third place. Swisscom, Switzerland’s former fixed-line phone monopoly, is the country’s largest mobile operator.