Good morning, everybody. This is Jørgen Rostrup, CFO of Telenor Group, talking from Helsinki, Finland, where we have an investor meeting right now. And also happy to welcome from the global conference call. I would like to welcome to an update on the Telenor DNA transaction. And we will after the update from me open up for questions. So there will be ample opportunity, if there are any questions, to be asked at the end of the session. I will also try to keep for you on the conference call track of where I am on the slides, so that you can follow at least the pictures and some illustrations as we go along.
I'm cautiously doing the disclaimer and hope that everybody are spending time on their own, by themselves, and then go straight to slide number three. It's a very interesting and important day for Telenor today. We are marking the closing of Telenor's acquisition of 54% of DNA, and also introducing a mandatory offering process for the remaining shares soon to begin. I will revert to that, of course. So after announcing the acquisition of the 54% majority in DNA from Finda Telecoms and PHP Holding in April on April 9th, we are pleased then to announce today that we have closed the transaction today, and that is after having received all required approvals.
Let me again take the opportunity to thank all those that have contributed to a speedy and very efficient approval process. It's been a delight from Telenor's side to work with a lot of experts in Europe and in particular in Finland. I would like in particular to mention good support and efficient handling from DNA management and the board of directors. All that has done transactions knows how crucial it is to work well with involved parties. We are proud and happy to welcome DNA and a very strong team on the ground in Finland of employees to the Telenor family, if I may use such a word.
You have to believe me when I'm saying that we can't wait to start working and to support the further development of DNA. We have in general had a good reception and what we have met in Finland. We look forward to extending the cooperation with the company and also with other stakeholders going forward. Turning to page 4, being the youngest telco company in Finland, DNA has, as many of us know, grown consistently over the years through organic as well as inorganic initiatives to become a very robust third player in mobile, a number two player in fixed, and also a number one position in TV, thanks to predominantly a strong challenger mindset in our view.
Thanks to the strong culture and support by a stronger market growth in Finland compared to most other European markets, DNA has delivered an exceptional 140% total shareholder return since the IPO in 2016. As you know, one of the best shareholder returns on the Nasdaq Helsinki stock exchange over this period. Telenor has a strong culture as well. We have a robust business performance and a robust balance sheet. We believe we are well placed to support DNA for the years to come, and we hope in a few years' time, everybody will recognize that Telenor was the best owner to replace two outgoing financial owners that has participated for a long time. 5G is coming up. We believe there is a need for further investment in DNA to strengthen the position DNA already have.
We also see mobile growth rates in Europe slowing a little bit down, and perhaps you will see a more balanced market in Finland to be expected. So we believe this is a good timing also for current shareholder to lock in profit from this unique journey that we have seen for the last few years. Let me on page five just very briefly remind a little bit about who Telenor Group is. We have 180 million customers across Nordics and Asia, where we are concentrating. We have set out a strategic direction in, we announced it in February 2017, at Capital Markets Day at that time, where we have set out to become a very focused and lean company. And everything we have done since then has been to concentrate around Nordics-...
concentrate Southeast Asia to modernize the company, firstly, to simplify structures, and also to continue to move up business performance. We have done this, in parallel, with also keeping a sharp eye to shareholder remuneration. And you will see that we, over these two and a half years, has paid out extraordinary dividend and bought back shares, with the implication of doubling the payout to the shareholders in the period. In the Nordics, we are one of the leading telcos with strong presence in all the three countries, Norway, Sweden, and Denmark. In Asia, we have a strong position in five, in our view, very attractive markets, characterized by real solid growth and also dynamic economics.
We believe that the combination of strong cash flow in the Nordics, and good growth in Asia represents an attractive value proposition for our shareholders, but also for our management teams and for our employees. The acquisition of DNA will consolidate our Nordic footprint and represent an important step towards executing on the strategy that I described. If we look at page six, what we said when we announced our intention back in April still stands in our view. Through this transaction, we are acquiring a strong challenger in a solid market, in a deal which is appealing to Telenor shareholders and which consolidates our Nordic footprint. Finland is one of the fastest growing and most advanced mobile markets in Europe.
Although we believe that market growth will not continue at the same, same high levels necessarily, we believe that Finland is a good and natural market to be in for Telenor. Also, the fact that it is, to such a large degree, mobile oriented and runs so high volumes of data is a good learning, ground for Telenor. We see the same development in other markets, and in particular, in Asia. DNA has a top-ranked brand and, has consistently been ranked as one of the most, attractive employers in Finland. These are also things we like about DNA. We like the DNA culture and the challenger position. And as I said, we believe as Telenor Group, that we can learn a lot, from DNA in that respect.
The acquisition is not based on synergies, but we see, as we have communicated, a potential best practice sharing synergies within some areas such as government, roaming, and also longer term, within B2B business segment. Now synergies has an annual run rate of approximately EUR 20 million. It's still an outside-in estimate. We have not been able so far to confirm it because we haven't been in that kind of dialogue for very natural reasons with DNA. I then turn it to slide seven. Nordic market is one of the two core markets in our core regions in Telenor strategy. Across segments in mobile and fixed, as well as consumer and business, we see a clear trends where different technologies are combined into a more holistic service offering.
We see that understanding and applying technology in a good way is key to providing customer solutions which are valuable. To be credible and trustworthy alternative in such a market, a strong infrastructure is important, as well as competitive and innovative service offerings, which are key. We believe we are able, with this portfolio, to provide that, and that all the businesses in the Nordics can benefit from learning from each other. The DNA acquisition will bring both size and growth to Telenor. Revenue will grow by around NOK 9 billion or 8%, whereas EBITDA will see an uplift of 6% or three billion Norwegian kroner, I guess. These figures are based on unaudited pro forma numbers. With this contribution, we also believe that DNA will become an important company for Telenor and in Telenor Group.
Slide eight is addressing the process to date. As I said in the beginning of the discussion, we have merger clearance from the European Commission was received without any remedies. With the last regulatory approval from the Finnish Ministry of Economic Affairs and Employment received this Monday, we are excited then to be able to announce the closing of the transaction today. It's a milestone in Telenor's history. So then again, thank you for all the support in getting to this point. Let's look a little bit forward. On slide nine we have some comments regarding the mandatory tender offer that we most likely will launch next Thursday. So what is that? 26th of August and running for four weeks.
29th.
Sorry, 29th, and running till 26th of September. Sorry. Thank you, Elise. This is, this is the most likely date, and we will, of course, confirm that as we get closer. This MTO, the mandatory tender offer, is triggered by the fact that we are acquiring more than 50% of the shares. So it triggers a mandatory offer to all remaining shareholders of DNA. We can today confirm that this offer, it will be at the same price as accepted by the majority shareholders at EUR 20.90 per share. Telenor will not increase the price for the tender offer. We have described the offer as full and fair, and we believe that that stands. Today, we are running a portfolio of eight business units. DNA will be, in retrospect, the number nine.
Three of them are today listed with minority shareholders, the five others are today fully owned in our group. The tender offer, as I said, period is planned to last four weeks, from August 29 to September 26, unless extended by the offerer. The offerer will publish an official document, a prospectus, on or about August 28, so one day probably ahead of the launch, subject to the Finnish Authority, FSA, approval. We will then go through that, and then we will ask for an extraordinary general meeting to be held as soon as possible after the MTO, in order to change the composition of the board of directors of DNA to reflect Telenor's shareholding.
We would very much like to participate in the effort of board of DNA in developing and supporting the company further. Provided that Telenor, after the tender offer, holds more than 90% of the shares, we will initiate a delisting process. If Telenor controls less than 90%, DNA will continue to be listed on Helsinki Stock Exchange, and then we need to say that investors may consider that this will probably be at a less liquid share with smaller trading volumes than before. But the position of Telenor is the same as it was from day one, and as we have stated, as on our thinking behind from day one, we are very okay with DNA continuing to be listed and to bring with us the minority shareholders.
And we are also very okay with a situation where we are fully consolidating it and owning a majority large enough to delist it and run it as a fully owned company over time. On slide 10, I just want to give you a couple of perspectives and views from Telenor, how we see the pricing, and we believe we see this from a shareholder's point of view. In our view, the offer price of 20.9 EUR per share represent a premium of 7% to the closing price to share the day before, i.e., on the eighth of April. More important, a premium which we believe is attractive of 21% over the 90-day volume weighted average share price.
This is adjusted for dividends and measured up towards 8th of April. When adjusting for the 2018 DNA cash dividend payment of EUR 1.10 per share, the offer price is also in line with the all-time high closing price of 21.98, I believe it is, of July 12, 2018. Over the time, at the time of the deal announcement, the offer price was also above the equity analyst's target price for consensus of, at that time, 18.80, 18.80, prior to the announcement. That was the consensus level. After the announcement, of course, the share price as well as equity analyst views has been affected by the upcoming MTO.
And if you look at some references, we can look to Elisa, another very, very capable Finnish company, and at high valuation multiples. The offer price values DNA is valuing DNA above Elisa's current trading valuations by a good margin. This equity multiple is 26.1x for DNA, compared to, I believe, 23.5, the numbers we have of Elisa. So it's a, it's a strong valuation up to the incumbent and largest player in the Finnish market. Also based on Telenor's experience as an active industrial acquirer, the offer price is also attractive, we believe, when the valuation is compared with relevant European sector transactions and trading multiples over the last several years.
Given DNA's strong share price development, many shareholders now have the opportunity to lock in a solid profit, and we believe they will do so. At slide 11, we have a long-term perspective on our investment in DNA. Maybe not necessary to state it, but I do it nevertheless. With our scale and capabilities, we believe are well placed to support DNA in driving shareholder value in long-term perspective. However, again, with 5G coming up, the need to strengthen B2B and an overall growth in line perhaps slowing down, such efforts may require further investments in the business, and the result from these investments may take time to materialize. For the past two years, DNA has used its capacity to pay dividends well above its free cash flow, and we believe this cannot continue forever.
We need to be confident that Telenor's long-term potential will not be restricted by its balance sheets. Based on DNA's Q2 2019 results, the company's leverage level is at the higher end of its targeted leverage level range of 1.5x-2x EBITDA. We therefore believe it's prudent to stay well inside the range to keep strategic flexibility. Therefore, unlike the previous two years, extraordinary dividends should not be expected in the near term. Let me then just wrap up at slide 12 stating that we believe the offer is attractive, and it is an attractive opportunity for DNA shareholders to tender their shares and lock in solid profits in the IPO. Going forward, we might see a changed liquidity in the stock.
If Telenor reaches 90% ownership, the company will initiate a delisting of DNA. We will not increase the offer price, which we deem to be full and fair for the minority shareholders. And again, as an industrial owner, we do not expect extraordinary dividends from DNA in the near. That is concluding my remarks. And I think I will first ask in Helsinki, in the conference room, whether there are any questions. So I will pause and check there, and after that, we'll get back to the conference call and opening up for questions. And of course, the room here can also ask questions later. Any questions from the conference room? Yes, please.
It's Kimmo from OP Markets.
If you would like to ask a question over the telephone today, please press star one.
On net results, do you think it's a fair policy or what are your thoughts on that?
Thank you for asking that question, so I can clarify. We believe that is. So we don't have a special view on the dividend policy. We think it is a good dividends policy. So we don't have a... In my comments, was not implied that we would have a different thinking around the dividend policy as such. It's more that. And we fully understand what has happened lately because of the opportunities to award the shareholders extraordinary. But we are more alluding to that we feel it's natural now to go back to the core of the dividend policy, which is what you are alluding to, 80%-100% of net income.
We are, as an owner, expecting less from the extraordinary di- element that we have seen lately. I think that last year we're practically at 140%, around that number. And we need to check it, but whether it was 135% or 140% of net income, and we think that is out of range for the next few years to put that.
Great. Thanks.
Other questions from the room? Yes, please.
Maria Hudon, JMP. You said, you can live with having minor owners in the company, but you also would like to have 100%. So, what is the role for minor owners, if there should be minor owners in the future in the company?
Well, I don't think I should define what role they should have or what role they should take. But it's important for me to say that we are very accustomed, and we have worked 20+ years with minority shareholders in large telcos globally. So we believe we can handle the claim in a very transparent way, and secure minority rights and minority, at least consideration, so that this is fair, transparent, and balanced, as it should be. So we are not concerned about that situation from that perspective. What role they can take, will take. I won't have any view. Of course, if there are minority shareholders and it's listed, the board should, for example, clearly reflect that.
There will be some practices in the board and audit committee and so on, that should reflect that from a governance point of view. So at least from a governance point of view, there are clear, this will have a clear influence, which we are, which we are super fine with. I'm not sure if I, if I nailed your question, but please, follow up with me. Okay, any other questions? And moderator, maybe we should, check if there are any questions, on the, on the conference call.
We have a question from Peter Nielsen from ABG. Please go ahead.
Thank you. Peter Nielsen, ABG. Thanks a lot. Good morning, Jørgen. Jørgen, just a question related to we've obviously spoken at the initial call you had, and now again, you've talked about what you could potentially sort of bring to DNA. And I think that in our meetings with the DNA management, they have also sort of echoed that. So I think there seems to be agreement on that. May I ask you, Jørgen, what do you think perhaps you can bring from DNA or from Finland? Obviously, data usage in Finland is significantly higher than in Norway and well, in everywhere else, and DNA is fairly early in Finland, sorry, on 5G. Do you think you can use some of those things at home in Norway and the other Scandinavian markets?
Yeah. Peter, thanks for that question. Yeah, we are very certain we can. We are quite excited and pleased with what we have seen so far and the dialogue we have had so far. You have to bear in mind that both parties have been very disciplined in not having discussions, which has been-
Yeah
... too early compared to even in the process. But it is clearly a very skilled team in DNA. First of all, a tremendous organizational culture, but also management and several of the key employees we have been meeting so far gives a fantastic impression. They are ahead on data volume and data traffic on the mobile side. This is going to be key for many going forward and several issues in our portfolio where we can benefit from getting extra input and extra views in those discussions. So that is a very important element. We also think that the general technology understanding is very, very strong.
So what we are hoping to do eventually is also to have a cross-fertilization of people, key managers and so on, and at least manage to get some of the Finnish experts to other business units. In time, and when it's ready, and based on people's preference. But of course, Telenor DNA together is also opening up a different perspective from a career opportunity for key managers. It's all very promising, and then we need to go through these next steps before we are really interacting in that process.
Well, thank you.
We have no further questions at this time. We have a question from Nick Lyall from SocGen. Please go ahead.
Hi, Jørgen. It's... Hope you can hear me. It's Nick Lyall from SocGen. Could I just ask Jørgen, on the, I think you mentioned in the call about the opportunity for people to maybe sell you the shares. But linked with that, you mentioned, and I may, I may have misheard, that it was more in line with market growth for DNA-
Yes
in the future. Is that right? I mean, obviously, the previous guidance was for it to be faster than average market growth. So maybe you could just confirm that. I've probably misheard that. And secondly, a bit of a cheeky one. On Axiata, could you just give us an update on the Axiata timing? There's been a lot going on. You've now obviously done DNA. Does that allow you to turn your attention to talks with Axiata? And what sort of timing should we expect for that? Thanks very much.
Nick, thanks a lot. So we haven't changed the view on the Finnish market, and we still think that DNA can be in the upper quartile of the players in how you are handling the market and the market growth going forward. We're just saying that we have been cautious in evaluating how this will develop further. And we also want to have this stated, that this is the one opportunity we have to talk to the minority shareholders about MTO. As I said, we are super fine with what we get of shares. We will not do any extra activity to try to attract neither more or less.
But we very much want to leave also a cautious note to shareholders of the new situation. That is the comment, basis for the comment, and we think market will stay strong, but maybe not at the level where we have seen it lately. On Axiata, Nick, we are engaging and focusing all our efforts and engagement into a continuous good and constructive dialogue with the other party. That’s where we are concentrating together with carrying out due diligence. And I appreciate from you and everybody else that a transaction and negotiations of this magnitude is creating a lot of interest. We are grateful for that.
It also creates some rumors and speculation, and I've learned through a long life that it's better to have a principle that you never comment on speculation and rumors, because it will, it will not be right anyway. So we don't do that, and we are concentrating our effort on the discussions and on the due diligence.
That's clear. Thank you.
We have no further questions.
Okay, and if there is no other questions, in this room either, I think we will end the session. You will get the information you need of the MTO process. Investor relations department in Telenor is also available should there be any follow-up issues. So feel free to get in touch, and thanks for listening in. Have a good day. Thank you very much.