TDC to buy MTG's TV business in $2.5 billion Nordic media deal

STOCKHOLM (Reuters) - Danish telecoms operator TDC TDC.CO has agreed a $2.5 billion takeover of Swedish Modern Times Group's MTGb.ST broadcasting and entertainment business, the latest deal in a global wave of mergers reshaping the telecoms and media sectors.

The cash and share deal, which values the acquired business at 19.55 billion Swedish crowns (1.75 billion pounds), would leave TDC with close to 3 million TV subscribers and access to 10 million households in the Nordic region, the Danish company said.

The deal would also allow TDC to offer a full package of fixed line and mobile telephone services, broadband internet access, TV distribution and streaming services in Denmark and Norway. Analysts, however, said TDC was paying a steep price for the assets and the company’s shares had tumbled 12.7 percent by 1101 GMT to their lowest since December 2016.

Shares in MTG gained 5.6 percent as the deal will enable it to fully focus on its digital arm.

The deal, which included the issue of about 300 million new TDC shares, also dampened some analysts' expectations that Nordic telecom operator Telia TELIA.ST could make a play for TDC.

Looking past the price tag, Sydbank analyst Morten Imsgard said the deal still made strategic sense for TDC.

“They have lost a lot of TV customers in 2017. By adding MTG’s direct web-based TV platforms they’ll become less dependant on their TV boxes. That might stem the flow of customers from TDC to the streaming services,” he said.

The possibility of a split of MTG into two separate companies had been seen for some time as there were no obvious synergies between the firm’s Nordic entertainment operations and its fast-growing digital business.

MTG CEO Jorgen Madsen Lindemann told Reuters on Thursday he believed competition authorities would approve the merger while TDC CEO Pernille Erenbjerg - who will head the group after the merger - said it was too early to comment on that process.

“If we go back a few years it was all about who was the strongest local competitor. These days of course we are up against the global giants,” she told a conference call.

Swedish investment firm Kinnevik KINVb.ST, which owns stock equal to 20 percent of the capital and 47.6 percent of the votes in MTG, said in a separate statement it supported the merger.

The valuation of the acquired business, comprising MTG’s Nordic Entertainment and Studios unit, was on a cash- and debt-free basis and based on the average weighted trading price of the past 10 trading days.

The deal is the second in quick succession involving Kinnevik, controlled by Sweden's Stenbeck family, with mobile operator Tele2 TEL2b.ST agreeing a $3.2 billion takeover of cable-TV provider Com Hem COMH.ST last month.

In recent global deals in the sector, AT&T Inc T.N and Time Warner Inc TWX.N are seeking to merge, while Verizon Communications Inc VZ.N bought Yahoo Inc's YHOO.O core business for $4.5 billion last year.

MTG, founded over 30 years ago by media mogul Jan Stenbeck, will continue to be listed on Nasdaq Stockholm as a digital entertainment firm focussed on eSports, online gaming and digital video content.

Reporting by Helena Soderpalm and Olof Swahnberg in Stockholm, additional reporting by Teis Jensen in Copenhagen,; Editing by Niklas Pollard and Susan Fenton