Telenor announced Oct. 25 it is selling its Telenor Satellite Services (TSS) unit to Apax Partners France for $400 million in cash.

Telenor had been shopping its satellite communications unit as a non-core asset since 2002; Apax intends to pursue the development of the company in Norway and abroad.

"We are delighted to make a further investment in satellite communication services by acquiring TSS," Bertrand Pivin, partner at Apax Partners in Paris, said in a statement. "TSS is not only a major provider of mobile satellite services, but also a leading competitor in the high-growth VSAT business segment, providing mission-critical satellite communication services to demanding clients worldwide."

The transaction, which is subject to approval from regulatory authorities, will not impact services provided by TSS, and business relations with customers will remain unchanged, Telenor said.

Telenor ASA is expecting to post a gain of about 1.4 billion Norwegian kroner ($211.9 million) from the sale. The transaction will not affect any other units of Telenor ASA using satellite as their communications platform, including Telenor Broadcast/Telenor Satellite Broadcasting.

Analysts hailed the deal. Espen Torgersen, a telecoms equity analyst at Carnegie told Satellite News "it is a good deal for Telenor, since one of the things that people have been questioning regarding their strategy is why are they not divesting non-core assets. In the present market, there should not be any reluctance to do that based on price. So from a strategic point of view, I think it is good… I think the price is OK. It was above our estimates. From a Telenor perspective, I am happy with the transaction."

Ole Petter Kjerkreit, a telecoms equity analyst at Enskilda Securities, also thinks Telenor did well: "It is strategically sound to divest these assets," he said. "Regarding the price, it was a good price for Telenor, much higher than most analysts had expected. Yes, I was surprised it took them so long to do this deal but, all in all, it is positive news… This was a smart move by Telenor. Hopefully, it will be a good deal for the new owner too."

Explaining why he thought it took so long time to make the deal, Torgersen said "Telenor on average [doesn’t] rush with divestments. They have a solid balance sheet. They are quite strict on pricing when selling assets. They like to sell assets at what they think is a good price. I think at times they believe you can achieve higher strategic value on a company if you get an industrial player acquiring the company, versus private equity which is less attractive. But, in this case, it has worked out well," he said.

Robert Baker, president of TSS’ holdings in Rockville, Md., described the 170-member staff as "very excited" about the purchase. Overall, TSS has approximately 550 employees. "We view this very favorably here," he said. "We anticipate that we’ll become an integral partner… The group is very excited and we look forward to doing business" under Apax’s aegis.

In July, Apax acquired France Telecom Mobile Satellite Communications for more than $76 million, and in 2005, an Apax-led consortium leveraged the takeover of Danish telco TDC for $15.3 billion.

"Obviously this will create some synergy down the line," said Baker, noting that TSS brings a contracted base of 400 service providers worldwide.

However, Baker noted that "it means that we’ll continue to be a subsidiary until the deal closes" in an estimated three to six months. "Until that time we are a part of Telenor [doing full business with clients]," he said, adding that the transfer of ownership would make "no impact at all" to current contracts.

"All existing partners continue their contracts and services as per their existing agreement, all will continue in place," Baker said.

He added that TSS globally reported generating revenues of $375 million in 2005, and "we’re expecting to exceed that" in 2006.

–Mark Holmes and J.J. McCoy