3i buys stake in Finnish mobile operator

3i’s growth capital division has taken a 25 percent stake in Finnish mobile operator DNA Oy, previously Finnet Oy, as private equity interest in the maturing European telecoms sector shows no sign of waning.

UK-listed private equity group 3i’s growth capital division has bought a 25 percent stake in Finnish mobile operator Finnet Oy for €140 million ($188 million).

3i will take one seat on the board of the company, which it has renamed DNA Oy, but has no plans to add to the management team. Its investment is intended to help the company develop into a full service telecommunications group offering mobile, fixed line, cable TV and broadband services, and prepare for a possible flotation.

Berndt Schalin, investment director at 3i, said telecoms remained an attractive sector.  “Now there are less fancy expansion plans in the maturing sector, telecoms businesses can be regarded as nice asset-based cash cows,” he said.

DNA has about 1.1 million customers in Finland and recorded sales of €365 million in 2006. Schalin said consolidation in mobile, fixed line and broadband communications was a big part of DNA’s domestic growth plans. However, international expansion was currently off the investment horizon, he added.

3i has accumulated its stake from 18 other small operators in the historically fragmented Finnish telecoms sector. DNA was the most attractive asset of its kind in Finland, Schalin said, given that its two principal competitors – Elisa and Telia Sonera – were already listed.

Other notable recent deals in the sector include the €1.3 billion purchase of German broadband company Kable by Nordic buyout firm EQT in April 2006, and Blackstone’s acquisition of a 5% stake in Deutsche Telekom, also last year.