France Telecom, TDC to merge Orange Switzerland and Sunrise

NOVEMBER 25, 2009 -- France Telecom and TDC say they have agreed to combine their respective Swiss subsidiaries, Orange Communication S.A. and Sunrise Communications S.A. The combined entity will be positioned as a nationwide alternative provider of telecommunications services in Switzerland.

NOVEMBER 25, 2009 -- France Telecom and TDC say they have agreed to combine their respective Swiss subsidiaries, Orange Communication S.A. (“Orange Switzerland”) and Sunrise Communications S.A. The combined entity will be positioned as a nationwide alternative provider of telecommunications services in Switzerland.

France Telecom will pay at closing a net amount of €1.5 billion to TDC and become a 75% shareholder in the combined entity. TDC will hold the remaining 25%.

With approximately 3.4 million mobile and 1.1 million fixed and broadband customers, the combined entity will account for around 38% of the mobile telephony market and 13% of the fixed broadband connections in Switzerland, the carriers say. For 2008, the combined entity would have generated total pro-forma revenues of CHF 3.1 billion (€2.0 billion) and EBITDA of CHF 809 million (€534 million).

As a full-service nationwide fixed and mobile operator, it will broaden the scope of services offered through more than 100 shops throughout Switzerland.

Gervais Pellissier, France Telecom deputy CEO and CFO, said, “The planned merger of Sunrise and Orange Switzerland marks a new significant step in the long-term investment by France Telecom-Orange in Switzerland. Following the UK joint venture between Orange and T-Mobile, France Telecom completes another major in-market consolidation, consistent with its M&A policy.”

Jesper Ovesen, TDC CFO, said, “We are pleased with the transaction and believe that the combination will create a stronger player in the Swiss telecommunications market. We look forward to working with France Telecom and creating further value for all stakeholders. The agreement is a natural last step towards TDC focusing on the Nordic markets, which is our strategic goal.”

The merger will create several benefits, the carriers believe:

  • It will result in better mobile network coverage, broadband capacity, and quality for 2G and 3G services, with notable environmental benefits.
  • Joint network development would lead to a reduction of around one-third in the projected number of mobile telephone antennas compared to the original standalone network build-up plans.
  • The combined entity would bring a better customer reach and service through a larger network of shops and improved customer services.


The carriers also cite several transaction highlights:

  • The combination and integration of Sunrise and Orange Switzerland is expected to generate synergies with an estimated net present value of €2.1 billion (CHF3.2 billion).
  • Estimated opex-based synergies, arising in particular from network and IT, distribution, marketing, and workforce optimization, are expected to reach an annual run-rate of CHF200 million (€132 million), with cumulative integration costs estimated at CHF140 million (€92 million).
  • Capex synergies of CHF570 million (€376 million) are expected between 2010 and 2015 (net of integration Capex) and a run-rate Capex savings of CHF65 million (€43 million) per annum from 2015.


The board of the combined entity will be composed of representatives of TDC and France Telecom, with France Telecom holding the majority of the seats. Thomas Sieber will be the CEO of the combined entity. Christoph Brand will continue as Sunrise‘s CEO up until the completion of the transaction. Post-closing, Brand will help supervise the initial integration before moving on to pursue new executive opportunities outside of the combined entity.

The combined entity will have a share buyback program targeted at TDC’s 25% stake to be executed at the discretion of the Board using cash generated by the company. If decided, the annual share buybacks will be executed in Q1 of each of 2012, 2013, and 2014, on the basis of pre-agreed multiples applied to prior year EBITDA and determined on the basis of a target net present value of €1.2 billion for the full 25% TDC stake.

TDC also will have the right to sell its stake to third parties from the second anniversary of closing or to do an initial public offering of the company from the third anniversary of closing. In addition, France Telecom will have an option to buy TDC’s shares from the first anniversary of closing at a minimum value of €1.2 billion, compounded at a rate of 7% per annum.

In connection with the exit routes, the following mechanism is put in place:

  • France Telecom to pay €100 million per year to TDC in each of 2012, 2013, and 2014 (representing c. €245 million of NPV)
  • Such payment(s) will not occur in the respective year(s) in which the share buyback is implemented, or if the France Telecom call option has been exercised
  • These payments may be reduced or reimbursable under certain exit scenarios for TDC (exercise of France Telecom call option, IPO or sale to a third party).


Prior to signing the final transaction documentation, which is expected to take place in the second half of February 2010, both TDC and France Telecom will undertake due diligence. The completion of the transaction will furthermore be conditional upon the approval by the relevant competition and regulatory authorities.

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