February 16, 2018 | Telecom | Europe | Ended

Com Hem / Tele2: Manageable Antitrust and Break Scenarios, Plus Optionality

A Com Hem-Tele2 combination has always made strategic sense due to complementary operations: combining a leading Swedish fixed broadband, telephony and pay TV player (Com Hem) with a leading Swedish mobile player (Tele2). Together the companies can threaten market leader Telia, already itself an example of the benefits of telco convergence in Sweden. In April 2017, after investment firm Kinnevik (KINVB SS) announced it purchased a 18.5% stake in Com Hem, rumours swirled that Tele2 would inevitably acquire Com Hem since Kinnevik held 47.6% of Tele2’s voting rights. A firm deal has now come to fruition, most likely brokered by Kinnevik, whose recently appointed CEO, Georgi Ganev, will become chairman of the new Tele2. In this report, we analyse the deal’s antitrust implications, break scenarios, strategic rationale and opportunities for activists to challenge the terms of this stitched-up ‘merger’.

Contents 1. Antitrust Considerations and the Swedish Telco Competitive Landscape 2. Financial Valuation and Break Price Analysis 3. M&A Activism Arguments Against a Perceived ‘Stitch-Up’ 4. The Break Spread and Risk Arbitrage Trading Considerations 5. Strategic Rationale, Deal Structure and Timing (38 pages)

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