Telia Company sells off Telia Carrier to Swedish pension funds for $1.1 billion

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Telia Company announces its intent to sell Telia Carrier to Swedish pension funds for $1.1 billion. (Getty Images)

Sweden's Telia Commpay announced on Tuesday that it was selling off its international carrier business to Swedish pension funds for $1.1 billion. The deal for Polhem Infra to buy Telia Carrier is expected to close in the first half of 2021 once it passes regulatory approvals.

Along with Lumen Technologies (formerly CenturyLink), NTT, GTT, Tata Communications and Telecom Italia, Telia Carrier is among the largest Tier 1 backbone providers in the world.

Telia Carrier's global internet backbone, AS1299, is the currently the world's largest, according to Dyn Research's global backbone rankings. All told, Telia Carrier's backbone accounts for nearly 65% of the global internet routes.

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Over the past 26 years, Telia Carrier has grown its global fiber network organically. Telia Carrier's global network serves more than 300 points of presence (PoPs) across 35 countries using its 65,000 kilometers of optical fiber.

Telia Company, which hired Allison Kirkby as its CEO and president in May, has been struggling a bit before and during the coronavirus pandemic. Telia said it would use a majority of the proceeds from the sale to strengthen its  balance sheet.

The deal is expected to generate a capital gain of about 7 billion Swedish Krona ($790 million) at closing, which would take a small bite out of its net debt that was 83.79 billion Swedish Krona ($9.4 billion) at the close of its second quarter.

James Crawshaw, principal analyst at Omdia, noted that Telia Carrier made about $11 million of free cash flow last year.

"The Swedish pension funds have paid top Krona for this business," he said. "Forty percent of Telia is owned by the Swedish state. So maybe the price paid reflects some hidden agenda.

"The other backbone providers would love to sell for those multiples, but I don't think infrastructure funds will pony up."

Polhem Infra is jointly owned by the Swedish pension funds First AP Fund, Third AP Fund and Fourth AP Fund.

Telia Company will become a long-term customer of Telia Carrier once the deal closes. Telia Carrier currently has 530 employees.

"Until then, it’s business as usual," Telia Carrier said in an email to FierceTelecom. "At a later stage, there will be a re-branding. There are no redundancies planned as a consequence of the deal."

Also on Tuesday, reinstated its full dividend for 2019, now paying 2.45 Swedish Krona ($0.27) per share that was first announced in January instead of 1.80 Swedish Krona ($0.20). Due to Covid-19, Telia decreased its dividend in March.

RELATED: Telia Carrier expands reach into Mexico with two POPs

Prior to the selloff, Telia Carrier put on some lipstick by adding two points of presence in Mexico, as well as new Dense Wave Division Multiplexing (DWDM) routes in the U.S.