The three Danish pension funds ATP, PFA and PKA sell their share of TDC to Macquarie at a big loss. What went wrong and what’s ahead?

In a significant development, three prominent Danish pension funds ATP, PFA, and PKA are divesting their 50% stakes in TDC to Macquarie, marking the culmination of a troubled seven-year partnership. This research note examines the flawed strategy behind the 2018 acquisition, the subsequent financial deterioration, and the lessons for the telecommunications sector. Strand Consult’s assessment of the flawed deal from 2018 is validated.

The 2018 Acquisition: High Hopes, Flawed Execution.

In 2018, ATP (led by Christian Hyldahl), PFA (under Allan Polack), and PKA (headed by Peter Damgaard Jensen), alongside Macquarie Infrastructure and Real Assets (MIRA, led by Arthur Rakowski), formed a consortium to acquire Danish telecom incumbent TDC, Denmark’s incumbent telecommunications operator, from Apax, Blackstone, KKR, Permira, and Providence for DKK 40.5 billion.  

The consortium’s strategy centered on splitting TDC into an infrastructure company (TDC Net) and a service company (Nuuday), banking on higher valuation multiples for infrastructure firms (20–25 times earnings) compared to traditional telecoms (10 times earnings). The plan promised enhanced network quality, reduced infrastructure duplication, and 1 GB/s broadband access for all Danish households by the mid-2020s, surpassing the government’s 100 MB/s target. Yet, this approach was criticized as financial engineering, prioritizing valuation tricks over operational efficiency.

The three Danish pension funds paid Macquarie substantial annual fees to leverage its purported telecom expertise to safeguard and grow their investment. The idea was for Macquarie to provide experience from the telecom world and ensure that ATP, PFA and PKA’s investment in TDC developed positively. However, Macquarie’s experience was limited to tower companies and niche operators, lacking the depth required to manage a complex entity like TDC. Subsequently TDC has lost approx. DKK 14.3 billion and its debt grew to more than DKK 62 billion.

While Macquarie had experience in investing in telecommunications companies like Axicom Group from Australia, Viom Networks from India, Russian Towers Group from Russia, Towercom from Slovakia, Arqiva from the UK all tower companies, cable TV operator D’Live from Korea and Ceske Radiokomunikace (Czech Republic radio/TV broadcaster), they were unmatched for the complexity of Denmark’s TDC. What made this so complex was TDC is a regulated incumbent in mobile, broadband and cable.

The pension funds ATP, PFA and PKA and Macquarie described their strategy at the time as voluntary takeover of TDC as follows:   

“The consortium’s plans will also reduce infrastructure duplication and accelerate the quality, expansion and speed of all telecommunications networks across Denmark. The consortium plans to invest significantly in the network infrastructure. This will be done in dialogue with all relevant stakeholders and will result in a significant upgrade of both mobile and broadband coverage in Denmark. It is the ambition of the consortium to work with energy companies in particular to increase the speed and coverage of fibre broadband in Denmark and thus ensure access to 1 GB/s broadband for all Danish households in the mid-2020s. Thus, the consortium’s plans exceed the government’s goal of 100 mb/s for the whole of Denmark.”

The strategy was to split TDC into separate infrastructure and service companies. This rested on an assumption that infrastructure companies trade at higher multiples (20-25x) than telecommunications service providers (10x). Moreover, they assumed that splitting up TDC and reclassifying the earnings into an infrastructure company would create value for the new shareholders without any underlying efficiency or improvement to the business.

It stands as a significant example of an attempt to spinoff a telecom company into larger than the mere sale of mobile towers to a buyer like a tower company. Indeed, other parties have tried this gambit around the world. 

In 2018, Strand Consult called the transaction “financial acrobatics” and warned ATP, PFA and PKA against a partnership with Macquarie. The Australian multinational investment banking and financial services group, however well-known and capitalized, did not understand TDC nor the unique Danish market. In research notes, articles, and emails to the parties, Strand Consult called the acquisition was a risky experiment with pensioners’ funds, Danish jobs, and critical digital infrastructure, highlighting Macquarie’s lack of understanding of TDC and the Danish market, predicting significant challenges. Specifically, Strand Consult called out the:

• Misrepresentations of TDC’s profitability and market dynamics.
• A strategy undermining Denmark’s infrastructure-based competition, a cornerstone of its telecom policy.
• Inevitable job cuts to offset value erosion.
• Legal risks from consolidating infrastructure, potentially violating competition laws.

The pension funds’ response was dismissive, with ATP’s Ulrik Weuder defending the strategy and a consortium representative attempting to co-opt Strand Consult with offers of future contracts, an offer rejected as an insult to professional integrity.

Strand Consult wrote to the parties:

• “You have said a number of things about TDC and the Danish telecom market that are not true – profit, investments, etc. what you have said and written looks like something that is based on prejudice and that is written by people without much detailed insight into the market. Nor do you paint a true picture of the regulation that TDC is subject to today. Why don’t you draw a true picture of the telecommunications market, which is based on facts that are publicly available?
• “You have chosen a strategy/model that I believe will be a showdown with the infrastructure-based competition, which has been one of the cornerstones of Danish telecommunications policy for more than 20 years. This is the policy that has given Danes access to some of the world’s best infrastructure and the lowest prices. It is actually in conflict with the policy pursued in the EU, which was the basis for the failure to approve the Telia and Telenor merger.
• “You claim that your strategy will not cost jobs at TDC. When I look at your strategy and how much value it will probably erode in TDC, there is only one way to maintain a reasonable return on the money you throw into TDC, and that is by firing people. It’s a longer discussion, conversely, you can get rid of people in two ways, throw them out on the street, alternatively sell off parts of the company, and then let the buyer do it – in modern Danish, it is called that the buyer reaps synergies.
• “You have a view of the future that I do not share with you, and the way you say that the challenges of the future must be solved is by consolidating the infrastructure. You will do this by entering into dialogue with those who establish competing infrastructure for TDC. From a competition law perspective, it is illegal from three angles. I am sure that you can find someone who can tell you a little about the legislation and how it works in practice.

The reaction we received from the pension companies was twofold: firstly, I was invited to a meeting with Ulrik Weuder, who was responsible for ATP’s investment in TDC. Second, They suggested the possibility of hiring Strand Consult for consulting services to TDC.  Christian Grønning from the consortium’s communications company Geelmuyden Kiese wrote to Strand Consult,

“We definitely appreciate your and your great insight in the field of telecommunications. In the wake of your emails, we have discussed with the consortium whether your knowledge might be valuable for them to “dive into”. Can you send me a presentation or similar about the services you offer? Maybe also some cases on the tasks you solve.

Strand Consult replied:

“The services you are requesting are not services provided by Strand Consult and your offer does not change what I say and mean. From a professional point of view, I consider your financial offer to be an insult when you, on the one hand, fail to answer my questions, and at the same time you think that you can silence me with a cheque. Sorry, I make a living by relating objectively and neutrally to the market and the opportunity to make money on ATP, PFA, PKA and Macquarie does not affect my attitudes to what is happening and what I say.

The meeting with Ulrik Weuder from ATP at TDC´s office did not change our view of that investment. In fact, it confirmed much of what we said and wrote in those weeks about the acquisition of TDC in 2018. He claimed that they had a different view of the case than we had.

Seven Years of Decline: A Grim Reality

Seven years later, TDC’s performance validates Strand Consult’s warnings. The company has posted consistent losses, with its debt ballooning to DKK 62.7 billion by the end of 2024, including DKK 34.4 billion to external lenders and DKK 28.3 billion to shareholders. Interest expenses reached DKK 5.1 billion in 2024 alone. Key metrics paint a dire picture:

• Revenue and EBITDA: In 2018, TDC’s Danish business generated DKK 17.356 billion in revenue and DKK 6.69 billion in EBITDA. By 2024, TDC Net and Nuuday together reported DKK 15.81 billion in revenue but only DKK 4.692 billion in EBITDA, reflecting a sharp decline in profitability.
• Customer Base: Cable TV customers dropped from 1,242,000 in 2018 to 845,000 in 2024 (a 31% decline), while broadband customers fell from 1,274,000 to 967,000. Mobile customers grew modestly from 2,993,000 to 3,331,000, buoyed by acquisitions and mobile broadband inclusion.
• Transparency: TDC reduced reporting frequency for cable TV and Nuuday’s financials to once annually, likely to obscure negative trends.

TDC’s late entry into fiber rollout left it trailing consumer-owned energy companies, which dominate Denmark’s fiber market with no return requirements. Price increases and discount brands like Telmore and Hiper have failed to stem customer churn, further eroding value

The experience demonstrates the validity of Strand Consult’s early assessment and critique.

Macquarie lacked understanding of the market and TDC; suffered consistent losses; and failed to deliver value to the pension funds in exchange for their management fee.

Morever, TDC did not deliver what its owners expected. The management hired from the 2018 deal  enriched themselves at the expense of the shareholders, while the company developed negatively.

The Pension Funds’ Exit: A Tacit Admission of Failure

Here is the record as ATP, PFA and PKA sell their 50% of TDC to Macquarie which has unsuccessfully managed their investment for the past 7 years:

• In the 7 years that the current owners have been responsible for TDC, the company has achieved one poor result after another. The results have been so poor that TDC’s owner has minimised the transparency that exists towards the outside world and not least the bondholders.
• In 2024, TDC decided that customer figures for the cable TV business will only be published once a year. In March 2025, it was decided to publish Nuuday’s financial figures only once a year. We suspect that the lack of willingness to create transparency is due to the negative development in the companies. 
• In 2018, TDC had a turnover of DKK 17.356 billion in the Danish business. Today TDC Net had a turnover of DKK 6.45 billion and Nuuday had a turnover of DKK 14.6 billion, i.e. a total of DKK 15.81 billion. In 2018, the company made an EBITDA of DKK 6.69 billion. Today, TDC Net makes DKK 4.692 billion and Nuuday makes DKK 1.44 billion, i.e. a total of DKK 6.132 billion at EBITDA level. Annual report for TDC Holding A/S.
• In practical terms, TDC have primarily compensated for the customer churn by raising prices.
• In 2018, TDC had 1,242,000 cable TV customers. Today it has 845,000 cable TV customers. We are talking about a 31% decrease in the customer base in 7 years.
• A not insignificant proportion of these customers are antenna associations that buy their TV and, in some cases, their broadband services from TDC.
• In 2018, TDC had 1,274,000 broadband customers. Today the number has fallen to 967,000 customers, which are divided between coax, fiber and other technologies.
• TDC started rolling out fiber very late. In this market, many consumer-owned electricity companies started many years before TDC, and they have established themselves acriss Denmark. We are talking about competitors which are overcapitalized and do not have a return requirement from their owners.  
• In 2018, TDC had 2,993,000 mobile customers. Today it has 3,331,000 mobile customers, which now includes mobile broadband customers as well as customers from the MVNOs that TDC has acquired.
• At the end of 2024, debt to external lenders amounted to DKK 34.4 billion. Interest expenses on these loans amounted to DKK 2.8 billion in 2024. Interest expenses on the loans that TDC has to shareholders amounted to DKK 2.3 billion in 2024. TDC does not repay the loan, and interest expenses are added to the principal, which has now grown to DKK 28.3 billion.
• In 2024, total interest expenses amounted to DKK 5.1 billion, and the total debt of the TDC Group amounted to DKK 62.7 billion at the end of 2024.
• All in all, TDC has chosen a strategy in which they try to retain price-sensitive customers through a number of discount brands (Telmore, Hiper etc), while continuously raising the prices of their classic brand.
• When comparing the figures, it should be remembered that the split into TDC Net and Nuuday, as well as the acquisition of customers and sales via wholesale customers, means that it is not possible to compare the figures one to one, but it gives a good picture of how things are going at TDC today.

Unfortunately for the three Danish pension funds, one of which is owned by the Danish state (state pension fund), have chosen not to talk much about the experience they have had with their investment in TDC, how it has developed, why they are selling right now, and at what price they are selling their shares and debt.

Danish journalists say that the pension funds will not comment on the case. This is unfortunate silence from the investors which own much of the critical infrastructure in one of the world’s most digital societies.

A view into the engine room of TDC.

The only information that exists of what is happening inside the pension funds’ engine room is an article from the daily newspaper Børsen from 24 May 2024 in which PKA talked about their share of the investment in TDC. In that article, Michael Nellemann, Investment Director at PKA, said that:

• That the investment in TDC is one of the largest single investments owned by the Danish pension companies.
• That TDC has been split into a service company (Nuuday) and an infrastructure company TDC Net.
• That the plan was to sell off the service part (Nuuday) and keep the infrastructure company (TDC Net).
• The goal was to end up with an investment in an infrastructure company, but they have ended up with the ownership of the service company Nuuday and the infrastructure company TDC Net.
• In addition to buying 16.7% of TDC’s shares, PKA has injected DKK 4.038 billion into the company as a high-interest loan.
• The shareholders last injected money into TDC at the beginning of 2023. Here, the four shareholders injected DKK 3.6 billion into the company, of which PKA injected approx. DKK 600 million.
• The fact that PKA has chosen to write down the share capital in TDC to DKK 0, and the only asset PKA has left in TDC on paper is a loan of DKK 4036 million to TDC.
• That TDC owed DKK 57.1 billion in 2024. DKK 24.6 billion to the owners, DKK 32.5 billion which has been raised in the loan market primarily by issuing bonds. 
• That TDC does not repay the loan to the shareholders, and that the interest that accrues on the debt has been added to the debt, so that the total debt in 2025 has grown to DKK 62,7 billion.
• That the accounts from the company that holds PKA’s TDC ownership show that only a modest return has been generated in the period 2018 – 2024.
• That a dividend has been paid in 2019 and a small saved profit, so that the total return to PKA can be calculated at DKK 57 million.
• This corresponds to a return of just over 1 per cent, while the S&P 500 stock index from 2018-2024 has yielded a return of around 74 per cent.

It is very clear that ATP, PFA and PKA’s journey with Macquarie did not go as planned. Sadly, the experience confirms Strand Consult’s initial predictions in 2018.  

Macquarie’s Next Steps: A Troubled Path Ahead

Macquarie now faces the daunting task of salvaging TDC. The original strategy of divesting Nuuday and retaining TDC Net appears untenable due to Denmark’s Competition Act, which prohibits agreements restricting competition. Nuuday’s new owners could demand competitive pricing from TDC Net, eroding its value post-sale.

A European consolidation involving giants like Deutsche Telekom, BT, Orange, Telenor, or Telia is unlikely, as cross-border synergies are minimal. TDC’s high debt and competition from overcapitalized, consumer-owned energy companies further diminish its appeal. Two potential paths remain:

1. Reintegration: Merge TDC Net and Nuuday to form a traditional telecom, though this reverses the original strategy and faces market challenges.
2. Breakup: Sell TDC’s mobile network and customers to Hutchison/3, sell the cable TV and broadband infrastructure and business to Fibia or Telenor, and sell the enterprise business to Global Connect, maximizing value through piecemeal divestitures, as seen in Brazil’s Oi case.

The sale requires regulatory approval, complicated by Macquarie’s mixed track record in Denmark, including its controversial role in tax evasion schemes pre-2018. Political scrutiny is expected, particularly given ATP’s 2018 assurance to parliament that selling to MIRA would risk foreign control of critical infrastructure, a stance now reversed.

What does TDC’s further journey look like?

When the three pension funds chose to sell their share of TDC to Macquarie last week, a new process began. Let’s try to look at the journey that TDC now must go through:

• We expect that the managements of the three pension funds ATP, PFA and PKA will disclaim responsibility and refer to the previous managements. This will contradict the fact that they have been responsible for the investment for the last 4 – 5 years.
• The transaction must be approved by the authorities at some point. We are talking about some authorities that have both good and bad experiences with Macquarie.
• On the positive side, there is Macquarie’s co-ownership of Copenhagen Airport from 2005 to 2017. An investment that the Danish state has now taken over after the company has lived a life with a combination of public listing and an ownership that has been split between a number of institutional investors, including Macquarie.
• On the negative side, the experience dates back to the period before 2018, when Macquarie helped people like Sanjay Shah empty a number of treasuries of several billions. That part was already described at the time of the acquisition of TDC back in 2018.
• Around the time of the acquisition of TDC in 2018, there was a lot of debate about foreign ownership of TDC. In a letter to the Danish Parliament,  ATP’s Chairman of the Board, Torben M. Andersen, wrote on behalf of the three Danish pension funds that: A sale of ATP’s ownership stake in TDC, to e.g. MIRA, is not considered to be appropriate. A divestment could lead to further uncertainty about TDC, as the Danish pension funds would then no longer have 50 per cent of the ownership and would not be able to control significant decisions in TDC, just as it would open the way for Danish core infrastructure to fall into foreign hands.
• It will be interesting to see how ATP, PFA and PKA will explain their changed attitude since they have now chosen to sell the entire company to Macquarie. We expect that this issue will create a lot of political noise. 
• In Denmark, there is a law on the direct evaluation of telecommunications equipment, and it requires the removal of equipment from untrusted suppliers. This Investment Screening Act forms the basis for the Danish National Strategy for Cyber and Information Security. The assessment is carried out by the Centre for Cyber Security (CFCS).
• In connection with the implementation of this law, the Danish security authorities asked TDC to replace their old WDM network from Huawei. According to TDC, a few years before they had planned to do so. The security policy decision has resulted in TDC taking legal action against the Danish state to get compensation for replacing their Chinese equipment.
• We expect that there will be people in the political system who see TDC’s lawsuit against the State as an attack on the State and a defense of China and Chinese infrastructure, which the Danish State wants to get out of the vital infrastructure in Denmark.
• TDC has a very large pension fund, which has more money than obligations to the old civil servants who have been employed by TDC. Over the past 7 years, the owners of TDC have been able to withdraw DKK 3.8 billion from the pension fund (over-coverage). Said with a smile, the ownership of TDC’s Pension Fund for the past 7 years has been a better business than the ownership of the telecommunications company TDC. In connection with the deal, the authorities will make sure that there is enough money in the pension fund cover the payment to the last civil servant’s pension.
• How will bondholders react to what has happened and how will the price of TDC’s bonds develop in the future? Right now, bondholders are without much insight into what is happening and will happen at TDC.
• How will Macquarie finance the business going forward? It may well be that Macquarie has big muscles, on the other hand, we are talking about TDC being a rather large and distressed case, where Macquarie has not been able to deliver what they promised in 2018.
• All this is happening at the same time as politicians across all the political parties are sitting and negotiating what the framework should be for the future Danish telecommunications policy. We expect that the sale of TDC to Macquarie will receive a lot of attention in this process.
• I could easily make the list much longer, the sale of the pension funds’ share of TDC to Macquarie will not be a pretty process where people will stand and cheer.

If and when a new deal is approved, Macquarie must execute a new strategy. This is likely to be difficult.  

We believe that the idea of divesting Nuuday and keeping the infrastructure part is stillborn. We are talking about an idea that does not take into account section 6 of the Competition Act, which states the following: It is forbidden for companies, etc., to enter into agreements that directly or indirectly have the purpose or effect of restricting competition. And in paragraph 2, where it is stated in short that Nuuday’s new owners cannot be forced to buy services at a high price from TDC Net.

On the day Nuuday is divested, Nuuday will of course expose the services they purchase from TDC Net to competition, which they can do with competition law in hand. In practical terms, the day before the sale of Nuuday will be the day when TDC is worth the most, after which the value will just decrease as Nuuday puts pressure on TDC.

We expect Macquarie to have a dream that TDC can be part of a European consolidation, where DT, BT, Orange, Telenor or Telia acquire TDC. The problem is that the synergies that these actors can reap across borders are marginal.

We are talking about a dream that all the owners have had since SBC Communications Inc sold out of TDC in 2004. A dream where people like us ask who is interested in a telecommunications company that operates in a very limited market, where the majority of the fiber infrastructure and one of the mobile operators is owned by cooperatives that have no debts and that do not have a return requirement from their owners. 

TDC operates in a market where there is some of the world’s best infrastructure, and where most  competitors are overcapitalized, energy co-ops with gigantic equity and without a requirement to make a rate of invested capital. It is the most brutal type of competitor a commercial company with a return requirement can have. It doesn’t get any easier when you have a debt of the size that TDC has today.

The problem with the TDC case is that all players who are just considering investing in telecom have been offered to buy Nuuday. It is and will not be an exciting case, and the likelihood that it can be sold at a price that corresponds to the debt in the company is not great.

We see two solutions, to merge the two parts of TDC (Nuuday and TDC Net) again and create a classic telecommunications company, or the most realistic model is to split the company into small chunks and make a Gordon Gekko and sell each of the chunks in the same way as you saw with Oi in Brazil.

Hutchison/3, which owns a mobile operator in Denmark, could buy the mobile part. Fibia or Telenor could buy the cable TV and broadband part and the Global Connect business part. It is very clear that TDC has greater value as a company that is being broken up than a classic telecommunications group.

We expect that the three Danish pension funds ATP, PFA and PKA are aware of this, and that they have acknowledged that, from an image point of view, it is not a good idea to be part of the process of winding up TDC as a telecommunications company and selling it in chunks. In plain English, ATP, PFA and PKA left the dirty work to Macquarie.

What can others learn from the TDC case

It is very clear that the TDC case is a cautionary tale. In a world where many telecom companies find it difficult to make their shareholders happy, companies and consultants get creative, sometimes with disastrous financial results.

The financial acrobatics that ATP, PFA, PKA and Macquarie have practiced in TDC have in this case been a very bad idea, apart from withdrawing money from TDC’s pension fund. 

It is very clear that the four players who took over TDC today appear as a bunch of clowns who will probably get a lot of attention in the future.

The first question to ask yourself is whether there is a market for full-service infrastructure companies that have mobile, broadband and cable TV. The second question is how much market share an infrastructure company can have before it falls victim to the competition rules that exist in most countries.

We have always understood the idea of creating focused infrastructure companies, as long as the underlying business case is market-based and sound. People who do financial acrobatics – like Macquarie’s old friend Sanjay Shah – success is always time-limited. In December 2024, Sanjay Shah was sentenced to 12 years in prison.

We hope that the three Danish pension funds ATP, PFA, PKA (one of which is state-owned) will create the necessary transparency so that we can learn from the many mistakes made in the TDC case.

The consultants who have helped TDC and Macquarie to develop and implement the strategy should not escape scrutiny. It is very clear that TDC has spent a lot of money on aid that has developed into a financial disaster. 

All this is happening at the same time as there is a debate in the EU about how to consolidate the market. In fact, on 8 May, the EU launched a consultation in which they are looking for inspiration on how to make it easier to consolidate the European market  in the future.

At Strand Consult, we will sit back and see what happens. The coming weeks will be very exciting, and we look forward to seeing how the three Danish pension funds will defend their changed view of who can own TDC.

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