Business 23 February 2021, 11:40am

Hungary’s 4iG enters telecom market with satellite acquisition

Portfolio

Publicly traded Hungarian IT group 4iG has signed a preliminary agreement with state-owned broadcaster Antenna Hungária Zrt. (AH) and Portuguese Telecommunication Investments Kft. (PTI), a company indirectly managed by Alpac Capital, to acquire 75% of the shares of Hungaro DigiTel Kft. (HDT), 4iG announced on the Budapest Stock Exchange website. HDT is Hungary’s leading satellite broadcasting and communications service provider and is a major player regionally. 4iG and AH intend to implement a joint expansion strategy in the Hungarian and regional telecommunications markets. The effort is supported by Alpac Capital, whose portfolio company will now be an institutional investor of 4iG.

4iG to acquire majority stake in HDT

4iG has signed a preliminary agreement with Antenna Hungária and Portuguese Telecommunication Investments, a company indirectly managed by Alpac Capital, to acquire 75% of the shares of Hungaro DigiTel, a joint holding of AH and PTI.

Under the agreement,

Antenna Hungária, which owns 50% of Hungaro DigiTel, will sell a 25% stake to 4iG,
the Portuguese investors will contribute their full 50% stake to 4iG,

which according to preliminary estimates before asset valuation will result in a more than 5% stake in 4iG.

The multi-stage deal could conclude in April following valuation of the stakes, the signing of the final purchase and contribution agreements, and the approval of Hungary’s competition watchdog GVH. 4iG will release detailed information on the capital raise through contribution once the GVH concludes proceedings.

HDT annual revenue above HUF 5 bn

Hungaro DigiTel is a major player in the region in telecom services and has its own infrastructure (satellite ground station). It builds, supervises and operates telecom networks using , VSAT (Very Small Aperture Terminal) technology.

The company currently employs 45 people and had revenue of more than HUF 5.2 billion last year, with EBITDA of HUF 3.1 bn.

Its customers include leading private businesses (banks, oil companies, TV channels) and state-owned companies.

In order to provide sufficient satellite capacity, HDT is leasing resources from several international providers (AMOS, Eutelsat, Intelsat) and could therefore be of immediate use in Hungary’s first commercial satellite project, scheduled for 2024, in which 4iG and AH will be partners.

Important announcement

Portfolio believes today’s announcement is important for three reasons:

4iG is entering a new industry,
The vast majority of 4iG’s revenue (84% in the first nine months of last year) come from one-off orders, and 69% come from public entities. Acquiring HDT could help increase both the ratio of ongoing orders and that of market-based revenue,
Outstanding contribution to EBITDA: although 4iG has not yet released its full-year report for 2020, but based on January-September figures and 2019 data, Portfolio’s calculations show that the HDT acquisition would have increased 4iG’s revenue by 9% and its EBITDA by a whopping 67% in 2020.

It is also an important aspect of the deal that although 4iG and Magyar Telekom are cooperating as partners in several projects, they will now also be competitors in yet another market.

Mutual advantages

"Following the founding of CarpathiaSat, the Hungaro DigiTel acquisition is another important step in elevating the existing partnership with Antenna Hungária to the strategic level as we aim to develop digital satellite technologies and act jointly in the domestic and regional telecom markets. Hungaro DigiTel will be our common vehicle in the industry in this endeavour and in our further expansion plans,” 4iG President-CEO Gellért Jászai said.

“Our cooperation with Alpac Capital is of key importance with respect to 4iG’s growth strategy. As an institutional investor, we will be able to integrate the group’s know-how and international experience into our company, which will further support our efforts to enter the regional market,” Jászai said.

“The existing partnership with 4iG in CarpathiaSat has successfully realised cooperation between state-owned and private enterprises. Based on our favourable experiences, we would like to raise cooperation to the next level and act jointly to improve our positions in the telecom market. In addition to becoming a common platform for expansion in the telecom sector, Hungaro DigiTel will also contribute satellite capabilities to Hungary’s satellite development,” Antenna Hungária President-CEO Zsolt Sárecz said.

As a fund manager, Alpac Capital aims to create value for its investors, which is why we continue to provide optimal capital to medium-sized European companies. The stake we are set to acquire in 4iG is an excellent opportunity to efficiently support its management in their expansion plans in the CEE IT and telecom markets,” Pedro Vargas David, CEO of Alpac Capital, said.