How large will Hungary's new IT giant be?

Looking at the 2018 numbers we find that T-Systems is a much (much) bigger company than 4iG. Its turnover was eight times as large as that of its buyer. (In order to have the full picture, we should note that revenues of T-Systems already include those received from the parent company. Not to mention that today’s announcement also notes that the SME business of T-Systems will be detached and it will not be part of the transaction.)

EBITDA (earnings before interest, taxes, depreciation and amortisation) of T-Systems was more than eight times larger than that of 4iG in 2018.

After-tax profit of T-Systems was also a lot higher, partly due to a one-off item. The difference is 20-fold in this case.

The headcount at T-Systems was 4.5 times as large as at 4iG at the end of last year.

So, how large could 4iG become after buying up T-Systems? For obvious reasons, we should not simply add the figures of the two companies, but we can assume the following:

• 4iG revenues have been rising dynamically on the countless tenders won. The growth reached 56% in annual terms in the first half of 2019 alone. It is also piling up contracts, plus there will be the sales revenue to be made by T-Systems. Together these could add up to nearly HUF 150 bn in the short term;
• the margins of the merged company are likely to be higher than those of T-Systems, in part because 4iG would not be operated as an integrator. 4iG would want to carry out as many tasks as possible without subcontractors, and that approach could yield higher margins;
• we should not just add the number of employees, either, because rationalisation is likely and the SME business of T-Systems is also to be carved out, and it will not be part of the transaction. Nevertheless, the merged unit could still have 1,000 to 1,500 employees.

• Tags:
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• t-systems,
• companies,
• telecom,
• infocommunication,
• market,
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• merger,
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• 4ig