Private Equity in the privatization process of Danish SOEs: A case and research study of the privatization process of TDC

Rune Klausen

Student thesis: Master thesis


Background: Privatization of State Owned-Enterprises (SOE) and the characteristic of the new owner have been debated over time; however Goldman Sachs purchase of Dong shares has re-heated the discussion. The paper examine the possible value creation with Private Equity (PE) as a co-owner in the privatization process of SOEs in Denmark, when value is understood as both public interest as well as economic profit. To investigate the value creation and the effects of the ownership, TDCs privatization process is used as a case to study the effects ownership and privatization of a SOE. The liberalisation of the communication service market and the governmental reasons for liberalization/privatization is measured 20 years after the beginning of the process. Results: TDC have increased its value over time and keep a high market share of the market. The development from a state company to a public company has shown increase in efficiency and ratios especial the first years. The PE fund National Telephone Company (NTC) bought in 2005 89% of the shares in TDC and focused on changing ratios for TDC by increased leverage and pay out high dividends. This strategic increase the financial drivers and lowered the operation drivers. The employees were reduced with 48% and the company was at level with comparable companies. The public interest in mainly a high competitive communication service market and universal service supply for the whole country has since the privatization work at a security for the public interest. With Denmark’s geographical change to less people in the “outskirts Denmark” the cost for TDC to live up to t new requirements of universal services, have challenged the public interest of equal access for all. Conclusion: PE can work as a value creation co-owner as long as there is a clear exit strategy for the Public Private Partnership on Equity. PE has focus on economic profit and not on long term public interest. After a partial ownership of the SOE, it is expected to be prepared for the private market and unnecessary activities are sold off.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2016
Number of pages101