The announcement that United Group, which owns - among other entities - the telecommunications operator Telemach, that they will sell its infrastructure has led to a flurry of questions and theories, including one that the company has overinvested and that they are selling Telemach to pay off large debts, which, according to media estimates reach a staggering €4.1 billion.

The company has denied the rumour, stressing they will not sell Telemach. They added however that they will sell its infrastructure – specifically telecommunication towers – in line with global trends. The investment banking giant Goldman Sachs has been hired to handle the transaction.

The separate entity, United Towers, has already been founded. Andrej Jezina, chairman of the management board for Telemach Croatia and Slovenia and former management board member of A1 operator, has been named as director of the new company. According to the United Group website, Jezina is one of its key managers, Lider reports.

The Croatian Jutarnji List daily lists the main competitors for the purchase of the towers, which are Vantage Towers, co-owned by Vodafone – the second largest telecommunication towers owner in Europe – and the investment company 4IG, allegedly close to the Hungarian Prime Minister, Viktor Orban.

The Netherlands-based United Group, the largest telecom and media operator in southeast Europe, has so far refrained from speaking publicly regarding its structure.

Serbian President’s ‘enemy’

What is known is that UG’s founder, the Serbian tycoon Dragan Solak, is one of the greatest ‘enemies’ of the Serbian President, Aleksandar Vucic, because Solak has founded media outlets in Serbia which are not closely connected to the regime. However, Solak sold a part of United Group to the American fund KKR back in 2014, and the shares were taken over in 2019 by the international investment company BC Partners, based in London. Soon after the takeover, that corporation bought Tele2 from its Swedish owner for €220 million, and in 2021 the corporation bought the controlling share of Optima Telecom for €90 million. BC Partners allegedly owns 56 percent of UG’s shares, while 42 percent is owned by Solak, who started his cable TV business in Serbia 23 years ago.

EBRD has supported the Group as a minority shareholder since 2004.

United Group was founded when regional operators SBB and Telemach Slovenia merged, and soon after Telemach Bosnia and Telemach Montenegro joined. In the meantime, Solak became one of European leaders in the telecom, sports (he bought the English football club Southampton) and TV business. He also owns Max City in the Croatian coastal town of Pula, where he is building a luxury hotel Valkala. The company Istra cement is in charge of the construction, and the hotel will be built on the location of a former quarry. Local activists fought the construction, but lost. Apart from Telemach, United Group is present in Croatia through the ownership of NovaTV, Sport Klub, and N1.

The story of the sale of part of United Group’s business started recently, when Moody’s revised down the credit rating of Adria Midco BV, the key company in UG’s portfolio, and when it came out that the total debt of United Group amounts to €4.1 billion, as well as the fact that a large portion of it is due in the next two years. The idea to sell the telecom infrastructure was a logical move after it was estimated that UG will not be able to cover the debt amout through its own business. The largest amount – more than €500 million – is due in 2025.

The staggering growth of United Group over the last three years has resulted in great borrowing.

“Acquisitions have been the only reason why United Group has entered the bonds market. All investment and capital programmes are financed through internal cash flow and current assets,” said the head of United Groups board, Victoriya Boklag, adding that the company’s rating has not taken a hit.

In January, Moody’s has confirmed our corporate rating B2 and only changed the outlook from stable to negative, Boklag said.