September 7, 2018 / 9:23 AM / a month ago

Swedish election could put government's Telia stake in play

STOCKHOLM (Reuters) - Telia’s plan to buy Bonnier Broadcasting could prompt the Swedish government to sell its 37 percent stake in the telecoms firm to limit state influence over local media, particularly if the centre-right bloc wins Sunday’s general election.

Moderate party economics spokeswoman Elisabeth Svantesson poses for a picture in Stockholm, Sweden September 4, 2018. REUTERS/Olof Swahnberg

The $1 billion deal, announced in July, is politically sensitive because the government already controls Sweden’s public service television network SVT, while Bonnier’s TV4 is the Scandinavian country’s biggest commercial channel.

All the major political parties oppose the deal because it would concentrate more media power in the hands of the state. But blocking it outright could prove complicated for a government that owns stakes in many companies and would likely lead to legal battles, experts say.

European Union regulators are also examining the deal. But as their core focus is the impact on consumers, they may wave the deal through, putting the ball back in Sweden’s court.

Apart from selling its stake, currently worth about 64 billion Swedish crowns ($7 billion), Stockholm could also look at breaking up Telia (TELIA.ST), the Nordic region’s biggest telecoms company, to limit the state’s role in the media.

Much will depend on the outcome of Sunday’s election, with the minority governing Social Democrats generally in favor of keeping the Telia stake, but the opposition center right open to potentially selling it.

“We have been clear in our party that it’s not appropriate that the state is main owner of TV4, that we are a big player in media,” said Elisabeth Svantesson, a lawmaker who speaks for the main opposition Moderate party on economic issues.

The centre-left bloc, uniting the Social Democrat and Green parties with the Left Party, currently has a slim lead over the centre-right in opinion polls, but neither is likely to win an outright majority, potentially leaving the anti-immigration Sweden Democrat party holding the balance of power.

The Sweden Democrats told Reuters they would prefer the state to keep Telia’s copper and fiber networks for national security reasons, but were open to selling the rest.

Telia wants to buy Bonnier Broadcasting to expand its media business as internet, telecoms and entertainment converge and U.S. streaming players such as Netflix (NFLX.O) and Amazon (AMZN.O) gain market share.

A majority in parliament must approve a potential sale of the Telia stake, but the final decision on whether to proceed rests with the government.

The Moderate party believes there is a good chance a majority in parliament would back a sale, while a break-up that might keep Telia’s copper and fiber networks in state hands was also a possibility.

“There might be a point in splitting the company, as one possible solution,” Svantesson said.

The state, which either owns or partly owns 48 companies in Sweden, sold 30 percent of Telia 18 years ago and listed the firm on the Stockholm stock exchange.

OBSTACLES

The government is by far the biggest single shareholder in Telia, followed by Blackrock with a 2.9 percent stake and Swedbank Robur funds, holding 2.5 percent, according to Telia based on data from June 30.

While the state could simply try to block the Bonnier deal, Daniel Stattin, professor of company law at Uppsala University, said that could prove difficult.

“I think it is not likely they will get approval from all owners,” he said.

“Even if the state would get approval at a shareholder meeting, the minority could say that would be detrimental to them, which the board could refer to and thus refuse to comply with the decision.”

Swedbank Robur, for example, backs Telia’s strategy to find new growth areas where it can achieve good levels of profitability, a spokeswoman said in an e-mail.

As the main owner of Telia, the state - which does not have a seat on the board - could seek to replace the board. But that would be a drastic move that would likely undermine investors’ confidence in the state as a corporate owner, Stattin said.

An even more extreme measure to stop the deal, floated by some politicians, would be to try to revoke the broadcasting license of Bonnier’s TV4. But as that could be seen as curbing freedom of expression, the reason for withdrawal would have to be very strong, a spokeswoman for the Swedish Press and Broadcasting Authority said.

The spokeswoman added the authority would only look at the deal after the EU has taken a decision, which is expected in the second half of 2019.

Editing by Eric Auchard and Mark Potter

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