Why Telia wants to sell TV4 – 1.5 years after the big deal

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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on June 22nd, 2021.

Only one and a half years in its possession – but already Telia is rumored to want to dump the Swedish broadcaster TV4. Surprising? Not at all. The world’s telecom companies never seem to learn from history – and all indications are that Telia will soon buy a “new” TV4.

A giant deal valued at almost SEK 10 billion. Transformative for both buyers and sellers. This is how it sounded when Telia bought Bonnier Broadcasting, which includes TV4, the Finnish equivalent MTV3, and the pay TV channels under the C More brand.

Only a year and a half later, Dagens Media states that Telia, where the Swedish state is the largest owner, wants to get rid of everything except C More.

How did we end up here?

The answer can be found with Telia Company’s current CEO, Alison Kirkby, who described the telecom market for SvD Näringsliv in October 2018.

I think it is very difficult for small, regional telecommunications companies to invest in both technology and content at the same time.

Kirkby was then the incoming CEO of the Danish telecom giant TDC, which blew off a merger with the Swedish television company MTG a few months earlier.

Content is difficult, she stated laconically.

That Kirkby would be skeptical of her new employer’s huge acquisition was perhaps therefore no surprise. The deal, which was examined by the European Commission for over a year, took place before she started. But it has now become her headache to solve.

The solution for Telia, which rejects the story, can therefore be to sell TV4 and Finnish MTV3. The article in Dagens Media refers to internal dissatisfaction and conflicts between the television unit and the telecommunications company. But more than anything, there are other mechanisms behind a potential sale.

The underlying reason is rather the identity crisis that the entire telecom industry is suffering from. It is, essentially, an infrastructure company that delivers broadband, television and mobile telephony – sometimes via cable, sometimes without. Infrastructure can be very profitable, but is also difficult to differentiate. Who really cares about the name of your broadband provider? Provided that the service works, is fast, and fairly cheap, the company behind it plays a minor role.

The same pattern can be found at telecom companies around the world. American Verizon, for example, bought the content companies Yahoo and AOL for a total of almost $10 billion, and then wrote off $4.6 billion just 2.5 years later.

Their competitor, AT&T, bought the media company Time Warner for $85.4 billion in June 2018. In May this year, they announced that Warner Media, as the company is now called, will instead be merged with Discovery.

These big, failed deals have been done to try to create an edge over the competition. The strategy is usually that you can share data with each other to increase the precision of your ads, and to be able to sell joint subscriptions to your end customer. Buy Telia’s broadband, get C More for a few extra bucks – that kind of offer.

However, that is easier said than done. The culture of telecom and media companies could not be further apart. The synergies rarely arise, and instead an internal strategy review is often appointed to go through the business. The investigation almost always comes to the same conclusion – the telecom company should focus on its core business instead. Which means the underlying technology.

A clear example of this is Swedish Hans Vestberg, who took over as CEO of Verizon 2018. He quickly stated that the company’s future was called 5G, and that the content it recently bought did not fit into that vision. They would invest in technology and infrastructure again. The social network Tumblr, acquired through the acquisition of Yahoo, was sold for $3 million. Original price: $1.1 billion.

Shortly before Allison Kirkby left TDC for Telia, she carried out a similar maneuver. TDC was divided into two parts – a content company and a technology company. In other words, Kirkby has already shown in action how she sees the telecom companies’ future vis-à-vis the media.

So what happens now? If one is allowed to speculate, Telia’s advisers will be given the somewhat ungrateful task of finding new owners for a traditional media company in 2021, and Telia will return to expanding its infrastructure instead.

But then, in a couple of years, it is conceivable that a new CEO will join Telia. They will find that it is difficult to differentiate yourself when you only have cables and technology to offer. And then they will – just like every other telecom company – start looking at buying media companies again.

This column was first published in SvD Näringsliv, in Swedish, on June 22nd, 2021.

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