Sweden's Telia expands media business with $1 bln deal for Bonnier Broadcasting

By Helena Soderpalm and Olof Swahnberg

STOCKHOLM (Reuters) - Sweden's Telia Company (TELIA.ST) announced a $1 billion (766,492 pounds) deal to buy Bonnier Broadcasting on Friday, its second major acquisition in a week as the top Nordic telecoms operator looks to expand its media business.

Bonnier Broadcasting, owned by a prominent Swedish family, includes brands such as Swedish TV4 and streaming service C More and Finnish MTV.

Scandinavian telecoms companies are doing deals to help them stand up to big internet players such as Netflix and Amazon Prime that are offering streaming services.

Telia is focussed on supplying a full range of mobile, fixed line and TV operations in its seven Nordic and Baltic markets after retreating from central Asia, a previous source of growth.

Telia announced on Tuesday it was buying TDC's Norwegian business in a $2.6 billion deal giving it broadband and TV operations in Norway, and had previously confirmed it was in talks with Bonnier to buy the business.

The Bonnier deal is however politically sensitive for the Swedish government, which faces elections due in September. It is Telia's biggest shareholder with a 37 percent stake, although it is not on the board, and already controls Sweden's other big traditional broadcaster, public service television network SVT.

"As a citizen I think it is strange that the state can control both public service and, if the deal goes through, the biggest commercial TV channel," said Georgi Ganev, CEO at Kinnevik (KINVb.ST), owner of several Nordic telecom and media firms.

Telia said it would take its role "most seriously" and continue to handle it responsibly. The government said it would meet the Telia board later on Friday to discuss the issue, according to news agency TT.

It quoted Swedish Minister for Enterprise and Innovation Mikael Damberg as saying the government was cautious about the deal but would not sell its stake in Telia if the acquisition secures regulatory approval.

"I'm not very impressed. It is important for the government with diversity in the media, and it is also important that there's a strong economic foundation for the deal," Damberg told TT.

A spokesperson for the Moderate party, the biggest in the opposition Alliance bloc, said the government longer term should aim to sell its stake.

Telia said it would pay 9.2 billion crowns ($1.03 billion) on a cash and debt free basis, and potentially an additional amount of up to 1 billion crowns based on future operational revenue and EBITA performance.

A source told Reuters late on Thursday that Telia had pushed for a deal valued below the 10 billion-12 billion Swedish crown range reported by local media in May.

It is the latest deal in a changing media landscape in Scandinavia amid pressure from U.S. media giants.

This year Sweden's Tele2 (TEL2b.ST) agreed to buy cable-TV firm Com Hem (COMH.ST), while Modern Times Group (MTGb.ST) said it would split in two, demerging its Nordic TV business and listing it on the stock exchange.

NO MORE BIG DEALS

Bonnier Broadcasting had sales of 7.5 billion Swedish crowns last year and an operating profit (EBITA) of 423 million crowns.

Telia said the acquisition was expected to generate synergies from 2020 with a full run-rate of 600 million crowns in 2022. It will establish a new business area, which would include Telia's existing TV business and Bonnier Broadcasting.

Telia announced a retreat in 2015 from central Asia after former management became embroiled in a bribery scandal in Uzbekistan.

Analysts had raised concerns that the move into media could dilute the focus on Telia's core telecoms business, threatening dividend payouts in the longer term.

But the company reassured investors that this was not the case.

"The acquisition of Bonnier Broadcasting will not affect Telia Company's share buy-back programme or dividend policy," Telia said in a statement.

Chief Executive Johan Dennelind said on Friday he now saw no room for further major purchases after the two deals this week.

Telia shares slipped 2.5 percent to 38.82 crowns by 1121 GMT. Stefan Ward, analyst at Pareto Securities, said the Bonnier acquisition increases uncertainty for Telia.

"I think Telia is not fully convincing about synergies and assumptions for that operation and that investors have doubts if Telia is the right owner for this asset."

Telia also on Friday reported second quarter earnings in line with expectations.

(Reporting by Olof Swahnberg and Helena Soderpalm; Editing by Niklas Pollard/Stephen Coates/Susan Fenton)