Three Danish pension funds sell their 50% stakes in TDC to Macquarie, marking the culmination of a “troubled seven-year partnership”, as Stand Consult describes it
Macquarie Asset Management has announced that it has entered into an agreement to acquire, via a MAM-led consortium (including its managed funds), an additional 50 percent stake in TDC Group from Danish pension funds PFA, PKA and ATP. In 2018, Macquarie and its consortium partners, ATP, PKA and PFA, delisted TDC Group from the country’s stock exchange, creating two independent businesses with standalone expertise in digital infrastructure (via TDC Net) and premium customer service delivery (via Nuuday).
Macquarie reckons the separation created an open-access model. But did it work? Stand Consult doesn’t think so. In 2018, Strand Consult called the transaction “financial acrobatics” and warned ATP, PFA and PKA against a partnership with Macquarie. The Australian multinational investment banking and financial services group, however well-known and capitalised, “did not understand TDC nor the unique Danish market”.
Seven years on and Stand Consult reckons it has been proved right: TDC has posted “consistent losses, with its debt ballooning to DKK 62.7 billion by the end of 2024, including DKK 34.4 billion to external lenders and DKK 28.3 billion to shareholders. Interest expenses reached DKK 5.1 billion in 2024 alone.”
Strand Consult then goes on to eviscerate the owners’ record in the intervening years. “Macquarie now faces the daunting task of salvaging TDC. The original strategy of divesting Nuuday and retaining TDC Net appears untenable due to Denmark’s Competition Act, which prohibits agreements restricting competition. Nuuday’s new owners could demand competitive pricing from TDC Net, eroding its value post-sale,” said Strand.
Brave face
The change in investment will result in Macquarie managing 100 percent of the capital in TDC Group. Macquarie Asset Management said it supports the existing strategies of TDC Net and Nuuday, including the completion of the fibre rollout to around one million homes, the continued investment in the transformation of IT and security, the implementation of the Net Zero plans and the switch-off of legacy networks.
“Digital infrastructure and services play a critical role in improving connectivity, driving economic growth and competitiveness and TDC Group has been at the forefront of delivering this in Denmark,” said Macquarie Asset Management head of digital Infrastructure for EMEA Nathan Luckey.
“We would like to thank our co-shareholders for their partnership over the last seven years, and we are excited to further increase our stake to full ownership of TDC Group,” he said. “We look forward to continuing to deliver on our strategy to accelerate the digitalisation of Denmark as TDC Group invests in its networks and technology to further enhance customer service, and network access, reliability and efficiency.”
Stand Consult however reckons MAM will probably end up with two choices given TDC is not an attractive buy for larger European telco rivals heading down the merger path. “TDC’s high debt and competition from overcapitalised, consumer-owned energy companies further diminish its appeal,” said Stand.
The first is to merge TDC Net and Nuuday to form a traditional telecom, though this reverses the original strategy and faces market challenges. The second is to sell TDC’s mobile network and customers to Hutchison/3, sell the cable TV and broadband infrastructure and business to Fibia or Telenor, and sell the enterprise business to Global Connect, maximizing value through piecemeal divestitures, as seen in Brazil’s Oi case.
“We expect Macquarie to have a dream that TDC can be part of a European consolidation, where DT, BT, Orange, Telenor or Telia acquire TDC. The problem is that the synergies that these actors can reap across borders are marginal,” said Strand. “TDC operates in a market where there is some of the world’s best infrastructure, and where most competitors are overcapitalised, energy co-ops with gigantic equity and without a requirement to make a rate of invested capital. It is the most brutal type of competitor a commercial company with a return requirement can have. It doesn’t get any easier when you have a debt of the size that TDC has today.”
And as Strand also goes on to point out, the acquisition, due to the history of the company, and the acquirer is going to be politically scrutinised over the coming weeks so popcorn orders are already being taken.
