Sunrise challenges Swisscom with € 6.29 billion deal for Liberty Global assets

(Reuters) – Sunrise Communications Group AG agreed to buy Liberty Global PLC’s Swiss unit in a 6.3 billion Swiss francs ($6.29 billion) deal to create a bigger challenger to Switzerland’s dominant mobile and internet provider, Swisscom.

FILE PHOTO: The logo of broadband and telecommunications provider UPC Switzerland is seen at its headquarters in Wallisellen, Switzerland, February 6, 2019. REUTERS/Arnd Wiegmann

The purchase of the Freedom of UPC Switzerland, accompanied by a 4.1 billion francs rights issue, to the Sunrise of the position of Switzerland as the second largest telecommunications company, and follows Liberty Global is the sale of the Austrian business of T-Mobile Austria last year.

Sunrise to pay Liberty Global 2.6 billion Swiss francs in cash, assume up to 3.6 billion Swiss francs of UPC for the debts of the company said in a statement.

Analysts have said a tie-up makes sense, given UPC fixed and mobile services will enhance the Sunrise’s No. 2 position in the Swiss market, and can help you go head-to-head with Swisscom as it tries to lure customers away from the country’s dominant telecom player.

The UPC business has 1.1 million TV customers, albeit with falling subscriptions and 138,000 mobile phone customers in Switzerland.

The deal gives Sunrise a great opportunity to leverage the brand and distribution network “to improve the current negative trajectory of UPC Switzerland by cross-selling fixed broadband and TV offerings to existing customers of Sunrise,” the Swiss company said in a statement.

Liberty Global, set up by U.S. cable pioneer John Malone, is the sale of the assets in the past year. The US listed company is also awaiting European Union approval for the sale of its assets in Germany and eastern Europe, to Vodafone for $21.8 billion.

The proceeds from the Dawn of the rights issue, which must be approved at the April 10 general meeting of shareholders, the fund will have a 2.7 billion franc cash payment to Liberty Global; redeem of 200 million francs of 1.5 percent senior secured notes due 2024; and pay in advance and cancel 910 million francs from the Dawn of the existing loan facilities.

They will also cover 200 million francs in the transaction costs.

Sunrise also said it was an extension of a maximum of 500 million francs of the existing credit facility and 200 million francs of the existing revolving credit facility for a period of 5 years after the deal is completed.

The deal is expected to close in the second half of 2019, and to add to Sunrise’s equity free cash flow per share from the first year after that.

Credit Suisse, JPMorgan and LionTree served as financial advisers to Liberty Global, while Deutsche Bank, UBS and Morgan Stanley advised Sunrise.

Reporting by Ismail Shakil in Bengaluru and John Miller and John Revill in Zurich; editing by Grant McCool & Shri Navaratnam

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