Lyse AS has entered into an agreement with Ice Group ASA to acquire the operational entities of Ice, integrate them as daughter companies into Lyse and continue the mobile phone operations under the Ice brand. Lyse will therefore become a complete provider of telecom services in Norway, extending its fiber broadband business to mobile telecommunications. The acquisition will be settled through a cash consideration of NOK 3bn to Ice, financed using available liquidity at Lyse, while Lyse also takes on NOK 2.8bn of outstanding bond debt from Ice.

The transaction is subject to certain customary conditions, including approval by the general meeting of Ice Group ASA, the Norwegian Competition Authority, the Norwegian Communication Authority and the Ministry of Local Government and Regional Development. Lyse intends to close the transaction, upon the approval of the above.

Thanks to exceptionally high power prices in H2 2021, Lyse exceeded Scope’s base case scenario for 2021 in terms of revenue, EBITDA and cash flow generation. Year-end 2021 leverage as measured by Scope-adjusted debt/EBITDA has undershot Scope’s expectation of 3.3x significantly (set at the last review in May 2021). And positive free operating cash flow generation during 2021 will allow Lyse to complete the acquisition with no significant negative impact on Scope’s previous medium-term forecast on leverage. Scope expects Lyse’s Scope-adjusted debt to increase somewhat as a function of the acquisition. However, thanks to: i) a low starting point for net debt as of year-end 2021; and ii) continued expected strong cash generation due to sustained high energy prices in 2022, leverage as measured by Scope-adjusted debt/EBITDA should remain within Scope’s Outlook expectation of 3-4x in 2022, with a potential deleveraging path thereafter depending on power prices and the magnitude of future capex. This is in line with the present ratings.

The acquisition of Ice fits well into Lyse’s growing telecom segment. With the purchase of 5G licenses in late Q3 2021, the company made its first foray into the mobile business. Lyse intends to bridge the last mile via wireless broadband to customers who are not financially viable for connection to its fibre network. The Ice acquisition, once approved, will broaden Lyse’s offering, making it a fully-fledged telecom provider. Scope expects the initial impact on the company’s business risk profile to be limited. However, if Lyse grows into a third force in Norway’s mobile market by building out its network, the company could strengthen its competitive position in the medium to long term.

This publication does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. For the official credit rating action release click here. On 4 May 2021, Scope affirmed its issuer rating of BBB+/Stable on Lyse AS.