Telemach Slovenija has signed a deal to acquire rival telecommunications services provider T-2 just as an agreement was penned to settle T-2's debt to the state-run Slovenian Sovereign Holding. Pending regulatory approval, the acquisition will shake up the Slovenian telecommunications market.

Telemach Slovenija, which is part of United Group, a Netherlands-based telecommunications and media corporation, will initially acquire 24.9% in T-2 and after it gets the regulatory approval it will have obtained at least 98.06%.

The company announced its intention to buy T-2 in mid-June, pledging for T-2 to meet its obligations to creditors, including Slovenian Sovereign Holding (SSH), which filed for receivership against T-2 in April, but the procedure never started in court as the three entered into negotiation on debt settlement.

€90 debt settlement deal

SSH, Telemach Slovenija and T-2 announced on 14 August they had reached a €90 million debt settlement deal. SSH was to receive €37 million immediately and the remaining €53 million, which will come with appropriate interest, by 31 July 2027.

SSH said the deal concluded the negotiations and debt recovery efforts initiated at the beginning of 2023, when it took over the claims and assets of Slovenia's bad bank, now defunct.

The debt stemmed from loans that banks approved to T-2's former owners in 2007 to build its own optical network. T-2 was at the time owned by Zvon asset management funds of the Maribor Archdiocese. Those went into receivership in 2012 in a major financial scandal.

The deal on debt settlement coincided with the signing of the deal to acquire T-2, a transaction that Telemach said would enable T-2 stable development and efficient investment in the latest technologies, products and improved user experience.

Market consolidation

"The combined Telemach and T-2 will offer users a technologically advanced fibre-optic network, enhanced mobile services and unlimited packages, and will help achieve the goal of 5G connectivity and coverage at the national level," Telemach said.

Tomislav Čizmić, CEO of Telemach Slovenia, said the consolidation of the telecommunications sector was essential to remain competitive on the Slovenian market and to promote digitisation and connectivity, which would also strengthen the Slovenian economy in the long term.

Jurij Krč, the majority owner of T-2 through the company Garnol who also sits on the management, said the acquisition by Telemach was essential for employees, customers and business partners, and would allow the company to continue to successfully develop its potential on the market.

T-2 CEO Robert Erzin assured subscribers the transaction would change nothing for them in the future as all the terms and conditions of business and customer relations would remain unchanged.

Major market player

Founded in 2004, T-2 generated €115.6 million in revenue and a net profit of €5.9 million last year. It has 360,000 users, of which 200,000 are using the mobile network and 160,000 fixed telephony.

Data from the Agency for Communication Networks and Service (AKOS) for the first quarter of the year show that T-2 has a market share of 7.27% in mobile telephony, 21.82% in broadband internet access, and 32.42% in Internet Protocol television (IPTV).

Meanwhile, Telemach Slovenija, which was founded in 1999, is the predominant provider on the cable TV market, controlling almost 90% of the market.

On the mobile telephony market, it held a 25.87% share in the first quarter of 2024, and a 35.53% share on the fixed telephony market. At the end of 2020, it rose to the top of fixed Internet providers in Slovenia, and now holds a 35.53% market share.

Taking into consideration their combined market shares, the state-owned telecoms incumbent Telekom Slovenije retains the largest market share only in mobile telephony (35.19%) and IPTV (42.02%).

The latest available data show Telemach posted a net profit of €318,000 and operating profit of €21.8 million on €273.6 million in net sales revenue in 2022.

Its owner, United Group, is the leading multi-play telecoms and media provider in South East Europe. In Slovenia, it also owns the online shopping portal Shoppster, sport TV channels Sportklub, media company Adria Media and the N1 news portal.

Founded by Serbian businessman Dragan Šolak, United Group has been in majority ownership of BC Partners, a London-based investment firm, since 2019, while Šolak and KKR, a New York-based investment firm, retained minority stakes.

In 2014, the Šolak family acquired the Bled golf course in Slovenia.