Orange Buys 54% Stake In Telekom Romania For $318M; Street Sees 29% Upside

France’s Orange SA has signed a deal to buy a controlling 54% stake in Telekom Romania Communications (TKR) from Deutsche Telekom’s OTE, in a deal worth €268 million ($318 million).

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Orange (ORAN) said that the transaction translates into a total enterprise value of €497 million, based on 100% of fixed operator TKR and the convergent customer base. The French telecom operator added that the deal will accelerate its footprint in Romania and convergence strategy in Europe. The transaction is expected to generate significant synergies deriving mainly from the cross-selling of services to existing customers, as well as the optimisation of the network including economies of scale and scope.

TKR is Romania’s second largest player in fixed telecoms with sales of €622 million reported in 2019. The company provides fixed voice, broadband and pay-tv services to 5 million customers and has a 90,000 km fibre network, which connects some 3 million households. It provides convergent services to about 881,000 fixed-mobile convergent subscribers, as of June 2020 through an MVNO contract with Telekom Romania Mobile. These customers will be integrated into Orange Romania’s network, following the completion of the transaction.

“This is a significant milestone for the Romanian telecom market that will enhance its attractiveness both in terms of converged telecoms services and high quality infrastructure, while increasing competition,” said Orange Romania CEO Liudmila Climoc. “It will provide the opportunity to scale up innovative convergent services, bringing broader benefits and wider choices to the customers and also to the country’s digital economy sustainable development. Orange Romania’s and Telekom Romania Communications’ network complementarity will allow us to bring together not only customers and teams, but also the best of expertise in terms of quality of service and future-proof mobile and fixed networks infrastructure.”

The transaction, which is subject to antitrust clearance by the European Commission, is expected to close within the second half of 2021. (See ORAN stock analysis on TipRanks)

Shares of Orange have plunged 23% since the start of the year and analysts have a cautiously optimistic Moderate Buy consensus on the stock’s outlook. That’s with a $14.55 average analyst price target implying that more than 29% upside potential lies ahead in coming months.