By Lefteris Karagiannopoulos
OSLO (Reuters) - Norway's Telenor ASA <TEL.OL> and Sweden's Nordic Entertainment Group AB (NENT) <NENTb.ST> will merge their Canal Digital and Viasat Consumer units to form a major regional TV distribution company, the two firms said on Tuesday.
The new business, in which Telenor and NENT will own 50% each, will have combined annual sales of some 7 billion Norwegian crowns (£594.35 million) and a total of 1.26 million subscribers.
The combination is expected to yield annual cost cuts of 600 million crowns, with a full effect from 2022 onwards, Telenor said.
One-off costs to pay for the merger will amount to some 830 million Norwegian crowns, the company added.
NENT's Viasat Consumer and Telenor's Canal Digital both offer paid satellite TV services, with the former also adding in broadband TV operations.
No cash will change hands in the transaction, even though Telenor has the largest number of customers, the Norwegian telecoms operator said.
"They (NENT) will put in the same values and assets for the new company," a Telenor spokesman said.
Telenor declined to comment on the extent of job losses that could follow from the deal.
The merged company will be headquartered in both Oslo and Stockholm and will focus on direct-to-home (DHT) satellite pay-TV and streaming services, as well as TV services distributed on open fibre networks, it added.
"There is a compelling business rationale behind combining the DTH operations of Canal Digital and Viasat Consumer, with large synergies to be captured within areas including transponder capacity, IT and opex," Telenor's Chief Financial Officer Joergen Arentz Rostrup was quoted as saying.
The joint venture is the latest in a series of measures Telenor is taking to address its business structures and core systems, in order to find and leverage strategic opportunities, the firm said.
"We are creating a large-scale TV operator that will create sustainable value for customers and owners, and be able to compete with large scale regional and local competitors," NENT Group's President Anders Jensen also said.
The board of directors for the joint venture will have an equal representation from Telenor and NENT Group, with a rotating chairmanship. The chief executive will be Bjoern Ivar Moen, the current CEO of Canal Digital.
The transaction is subject to regulatory approval and is expected to be completed during the first half of 2020. There will also be consultations with employee unions, the companies wrote.
(Editing by Terje Solsvik; Editing by Lisa Shumaker)