European telcoms group Lebara explores sale
London-based company has been a winner from the squeeze on consumers across Europe
European telecoms group Lebara is examining a possible sale or initial public offering after emerging as a winner from the cost of living crisis.
The London-based company, which since 2019 has been owned by the investment groups Alchemy and Triton, began life offering cheap international phone calls to migrants who had come to Europe.
Over the past three years, the company has shifted focus to target younger consumers and those seeking cheaper deals than on offer from major telecom operators.
Since 2020, Lebara has added more than 1.6mn customers, taking its total to 4mn. It expects to generate earnings before interest, taxes depreciation and amortisation of £70mn next year, more than double the level of 2020.
Chief executive Stephen Shurrock said the group was working with advisers at the investment bank Guggenheim to assess its strategic options. A sale could attract interest from a private equity or corporate group, he said, adding that deliberations were at an early stage and no decision had been taken.
“Under our existing ownership we’ve really had a remit which is ‘fix what you’ve got’,” said Shurrock. “The transformation of the business is very substantive.”
Lebara offers its SIM-only mobile phone plans in the UK, France, Germany, Netherlands and Denmark.
The company is a mobile virtual network operator, meaning it does not have its own networks and uses wholesale agreements with operators such as Vodafone in the UK to sell services to consumers.
Karen Egan, a senior telecoms analyst at Enders Analysis, said Lebara would “attract a high [ebitda] multiple” as MVNOs have low levels of capital expenditure and are becoming “very attractive” to network operators because of their subscriber bases.
In 2020, Spanish telecoms group MasMovil paid a multiple of 8.2 times for Lycamobile’s Spanish business, also an MNVO.
“I think that multiples could be higher now given the strength of the MVNOs both in terms of growth trajectory and ability to move between network operators,” Egan added.
The sector has benefited as the squeeze on living standards prompts consumers to look “for cheaper offers” while the pandemic helped accelerate online sales for MVNOs.
“There’s loads of organic growth left in this market for us,” said Shurrock.
Lebara’s new owners invested about €25mn into the business in 2021. As part of that shift, the company says now nearly two-thirds of its revenue is recurring, double the levels seen in 2021.
Alchemy, which is the majority owner, and Triton took control of Lebara in a debt-for-equity swap after the company faced a litany of financial reporting errors and breaches of debt terms under its previous owners, a little-known Swiss family office.