Telenor has become the latest European telecoms operator to be targeted by an activist investor with a campaign to push the Norwegian state-controlled group to spin off its mobile masts and increase its debt.
Constructive Capital, previously involved in an offensive against parts manufacturer Kongsberg Automotive, claimed in a letter to Telenor’s board that its proposed course of action could boost the company’s share price by up to 84 per cent.
“A higher share price will create new growth opportunities for Telenor by enabling acquisitions using Telenor’s shares as currency, an approach that may not be attractive at Telenor’s current share price,” stated the letter, seen by the Financial Times.
“The board currently has a unique opportunity to both facilitate this and at the same time create very lasting value for Telenor’s shareholders.”
Telecom Italia, Vodafone and BT have all been targeted by activist investors with the main demand being often to separate out their network assets or masts. Telecom operators’ shares — long prized for their steady dividends — have failed to keep up with the broader market in recent years.
Telenor’s share price is down 3 per cent over the past year and is at the same level it was four years ago, giving it a market capitalisation of NKr241bn ($28bn). Norway’s government owns 54 per cent of the company, but has suggested in the past that it could cut it to about a third.
Constructive Capital, a little known local activist which is understood to own an indirect stake in Telenor below the 5 per cent disclosure threshold, argued in the letter that spinning off the infrastructure assets could boost Telenor’s share price — which was NKr164.25 at Friday’s close — by NKr55-NKr90 per share.
The activist also urged Telenor to switch NKr75bn of its funding from equity to debt, arguing that the group could support higher debt levels. That could boost the shares by an additional NKr40-NKr50 per share, it claimed.
Telenor said: “We acknowledge that the board of directors of Telenor and Telenor’s management have received a letter. The board and management welcome feedback from stakeholders. However, we won’t comment on specific details of this letter.”
Telenor, which reports full-year results on Wednesday, has in recent years sold out of Russia, India and eastern Europe as it refocuses on the Nordic region and Asia.
But it is facing intensifying competition in its home market after Telia, the former Swedish and Finnish telecoms monopoly, bought a Norwegian TV and broadband provider to add to its mobile services.
Constructive Capital declined to comment. Its managing partner, Lars Odin Mellemseter, is a former McKinsey consultant and portfolio manager at now defunct investor Ascend Capital who until recently sat on the nomination committee of Swedish fashion group RNB Retail and Brands, another previous target for Constructive Capital.
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