Question
Norwegian firm BT is to be privatized via IPO, selling 500 million new shares representing a 17% stake in BT. The global coordinators for the
Norwegian firm BT is to be privatized via IPO, selling 500 million new shares representing a 17% stake in BT. The global coordinators for the IPO are UBS, Goldman Sachs and Macquarie Bank of Australia. The final share price will be announced in early April 2024. The stock will start trading on April 22nd in Oslo and New York, the next day in Sydney. BT is expected will lose its monopoly on land lines and the growing threat from 5G and deregulation that could attract competition. The exact nature of the future regulatory environment is uncertain. BT sales reached Krone (NOK) 16.1 billion. Currently, BT derives 95% of its revenues from sales in Norway. BTs CEO Lars Thorwald plans to increase revenue from foreign sources to 20% by 2030. BT together with France Telecom acquired a 10% stake in Telstra of Australia. BT and France Telecom each paid $1.8 billion for 5% of Telstra. BT, following privatisation, will list on multiple exchanges, and will now have to pay income tax though, it no longer has to pay for losses of other government owned entities. Furthermore, Mr. Thorwald needs the fresh capital to start paying off BTs considerable debt. The debt of BT is currently estimated to be NOK 100 billion at market value. The IPO is the first tranche that will be sold to the public. A second equally large tranche will be offered in 2026, followed by the sale of the governments majority stake in the company. Other national telecommunication firms in Europe have either recently raised capital or are contemplating listing on exchanges. The IPO will be global. 50% of the issue will be sold in Norway, the rest will be distributed in Europe (20%), US (20%), and Asia & Oceania (10%). Norwegian institutional demand is secured since BTs shares will represent and estimated 8-10% of the Oslo Bors All-share index. BT has spent more than NOK 40 million on advertising. An extensive roadshow is going on to raise sufficient demand from foreign institutions. The screenshot are recent analysts projections for BT earnings and other relevant data. Question: Mr. Thorwald needs your input on the price-range for the roadshow. He strongly believes that this should be based on DCF analysis. What NOK price-range would you recommend based on the pro forma above? You may assume that the price should reflect the DCF as of 31/12/2024 and that all cash flows arrive at the end of each calendar year. Please clearly state and motivate additional assumptions you make for your analysis
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