LONDON/BUDAPEST (Reuters) - Britain's Vodafone (NASDAQ:VOD) will sell its Hungarian business for 715 billion forints ($1.8 billion) in cash to local IT company 4iG and the Hungarian state, consolidating the hold of Prime Minister Viktor Orban's government over the telecoms sector.
Orban, in power since 2010, has expanded his nationalist government's influence in areas such as energy, banking and the media, which it considers strategic, and long harboured plans to tighten its grip over the telecoms sector.
The deal — which does not include Vodafone's shared services business VOIS — is expected to create Hungary's second largest telecoms operator. 4iG will hold a majority 51% stake while the Hungarian state will hold 49%.
"The combination of 4iG and Vodafone is a significant step towards building a Hungarian owned national champion in the (Information and Communications Technology) sector," 4iG said in a statement on Monday.
The British mobile phone and broadband group said it had agreed non-binding terms with the buyers, 4iG and state-run Corvinus Zrt.
Minister for Economic Development Marton Nagy in a statement noted the government's prior successes with boosting ownership in other strategically important sectors.
"Now there is a chance for a Hungarian company, with a state ownership stake, to become a significant player in the telecoms market as well," he said.
4iG has grown exponentially in recent years, becoming the dominant ICT group in Hungary through acquisitions, lucrative state contracts and growing its existing operations.
CEO and largest shareholder Gellert Jaszai told Reuters in 2019 that 4iG planned to grow through debt-fuelled acquisitions in Central Europe.
Businessmen close to Hungary's ruling Fidesz party have come to dominate several industries as the government, which was re-elected for a fourth consecutive term in April, expands its direct involvement in a number of key sectors.
"The Hungarian Government has a clear strategy to build a Hungarian owned national champion in the (Information and Communications Technology) sector," Vodafone Chief Executive Nick Read said in a statement.
The sale is expected to be completed by the end of 2022.
4iG shares jumped 9.25% on Monday to trade at 850 forints on the Budapest bourse at 0843 GMT.
($1 = 404.0500 forints)