Telekom Srbija’s Expansion Raises Prospect of Gulf Equity Investment

Telekom Srbija has expanded its market position through acquisitions, network investment and international borrowing, while Gulf investors have simultaneously increased their exposure to Serbia’s telecommunications sector. The company controlled 71.4% of fixed telephony subscribers, 58.5% of fixed broadband, 62.3% of media-content distribution and 41.53% of active mobile subscribers in the first quarter of 2026.

The figures do not make Telekom Srbija a legal monopoly. Serbia has three mobile operators, number portability, private competitors and a regulator that publishes market-share information. The company is instead a state-controlled incumbent at the centre of a concentrated telecommunications market, with its strongest position in infrastructure-intensive fixed services, television and bundled products.

In mobile services, Yettel held 32.27% of active subscribers and A1 Serbia 26.20%. Fixed broadband and media distribution are increasingly concentrated between Telekom Srbija and the economic group formed around SBB and Yettel. Their separately reported shares amount to approximately 33.4% of fixed broadband and 34.4% of media distribution, leaving Telekom Srbija as the larger participant.

Gulf investors are already active in Serbian telecoms

Gulf capital has already established a significant position on the competitive side of Serbia’s telecom market. Abu Dhabi-based e& completed the acquisition in October 2024 of a controlling 50% plus one economic share in PPF Telecom’s businesses in Serbia, Bulgaria, Hungary and Slovakia. e& subsequently partnered with PPF in the acquisition of SBB Serbia for €825 million, adding more than 700,000 active customers to the Yettel platform.

SBB recorded €244.1 million in 2023 revenue and an EBITDAaL margin of approximately 50%. The transaction implied a multiple of about 6.8 times EBITDAaL. The transaction established a precedent for substantial Gulf investment in Serbian telecommunications where infrastructure, recurring customers and consolidation opportunities are combined. Telekom Srbija responded with its own expansion programme. In February 2025, it agreed to acquire a group of United Group assets for €652 million, on a cash-free and debt-free basis.

The transaction included Eon TV International, NetTV Plus, direct-to-home television operations in Serbia and North Macedonia, and Sport Klub-related sports rights across the western Balkans. Telekom Srbija also absorbed Orion Telekom and smaller fixed-network assets, increasing its fibre, broadband and enterprise footprint. Management has set a target of approximately €3 billion in annual revenue by 2030, reflecting the company’s expansion from a domestic incumbent into a regional telecom, content-distribution and digital-services group.

Bundled services support Telekom’s market position

Telekom Srbija’s integrated model allows it to combine mobile services, fibre broadband, fixed telephony and television under a single customer relationship. Serbia had approximately 1.88 million bundled-service subscribers in the first quarter of 2026. Internet, fixed telephony and television represented the most common three-service combination. Sports and other strategically important content can support customer retention and pricing, while exclusive rights can also be licensed to competing distributors. At the same time, fibre investment increases connection speeds and the existing fixed network gives Telekom access to households that would require substantial investment for new entrants to replicate.

The company’s market position therefore rests not solely on its subscriber numbers but on the combination of infrastructure, content, distribution reach and financial capacity. That expansion has produced significant reported growth. Telekom Srbija recorded €2.3 billion of group revenue in 2025, an increase of 28.1%, while adjusted EBITDA increased 51.3% to €1.3 billion. The resulting adjusted EBITDA margin exceeded 50%, although credit-rating agencies use different earnings definitions.

Credit agencies apply more conservative earnings measures

Fitch calculated 2025 revenue at RSD231 billion, equivalent to approximately €2 billion, and Fitch-defined EBITDA at RSD87 billion, or about €740 million. That produces an EBITDA margin of roughly 38%. The figures are not directly comparable because of differences in accounting definitions. Fitch treats content-cost amortisation as an operating expense, reflecting the continuing cost associated with sports and entertainment rights.

That distinction would be significant in any equity transaction. A valuation based on management’s €1.3 billion adjusted EBITDA could differ materially from one based on the more conservative credit-agency measure. Content can attract and retain customers, but sports and entertainment rights require continuing payments and renewals. Competition for football, basketball and regional rights can increase those costs. Fitch expects consolidation to support margins, but the sustainability of earnings remains closely connected to how content expenditure is treated. An equity investor would therefore need detailed information on individual content contracts and their associated costs rather than relying exclusively on an adjusted EBITDA figure.

International bond markets have financed the expansion

Much of Telekom Srbija’s recent growth has been financed through banks and international bond investors rather than new shareholder capital. In October 2024, the company issued a $900 million international bond carrying a 7% dollar coupon. Telekom Srbija said it hedged the dollar exposure into euros at an effective interest cost of approximately 5.9%. Investor demand reached approximately $5.5 billion, nearly seven times the amount offered. BNP Paribas, Bank of America, Deutsche Bank, Erste, Raiffeisen, UniCredit and MUFG arranged the transaction.

A substantially larger financing followed in May 2026. Telekom Srbija raised the equivalent of approximately €1.95 billion, with reported orders of $13.87 billion from around 300 institutional investors. The syndicate included Bank of America, BNP Paribas, Citi, Deutsche Bank, Eurobank, JPMorgan, OTP, Raiffeisen and UniCredit.

The issue consisted of $1.35 billion of 7.25% notes due 2031, €500 million of 6.75% notes due 2033 and €300 million of 7.125% notes due 2036. Before currency hedging, the three instruments carry annual coupon payments of approximately $97.9 million and €55.1 million. The proceeds were primarily intended to refinance existing obligations rather than increase net leverage. The coupon levels nevertheless demonstrate that access to international capital markets has not made Telekom Srbija’s financing inexpensive.

International banks have deepened the company’s capital-markets infrastructure

The banks involved in these transactions now perform a broader role than simply providing loans to a Serbian state-controlled company. They have acted as underwriters, bookrunners, currency-risk advisers and distribution agents, connecting Telekom Srbija with international institutional investors.

The two bond transactions have also required the company to establish and maintain a credit-rating history, international investor documentation, compliance and sanctions procedures, international legal structures and regular communication with asset managers. Those capabilities are relevant to a potential minority-equity transaction because much of the institutional infrastructure required for international capital raising is already established.

Leverage remains a central consideration for investors

Fitch upgraded Telekom Srbija to BB- with a stable outlook in May 2026, forecasting stronger free cash flow during 2026-27 and positive free cash flow in 2028. Fitch calculated net leverage at approximately 6.5 times EBITDA in 2025, projecting a decline to 5.2 times in 2026 and 4.3 times by 2029.

The rating agency also noted that Serbia generated 69% of group revenue, leaving Telekom Srbija materially dependent on one relatively small domestic market despite its regional expansion. The rating includes a one-notch uplift based on Serbian state ownership and Fitch’s expectation that government support could be available if the company experienced financial distress.

Moody’s uses a different methodology but identifies similar balance-sheet pressures. It estimated adjusted gross leverage at 4.4 times in 2025 and highlighted approximately €900 million of negative free cash flow, linked to acquisition expenditure, network investment, customer migration, 5G deployment and sports content. At the end of March 2026, Telekom Srbija reportedly had approximately €254 million of cash and €673 million of available credit facilities. Moody’s expected the company could return to capital markets to address maturities falling due in 2028. The different leverage calculations do not change the underlying financial picture: Telekom Srbija has substantial market scale and improving earnings, while cash generation has yet to match the pace of its expansion.

5G deployment adds another capital requirement

Telekom Srbija commercially launched 5G in December 2025. The company plans to extend coverage to all Serbian cities during 2026 and achieve nationwide coverage by the end of 2027.

In May 2026, the US Export-Import Bank gave final approval for financing connected with equipment and services supplied by US technology companies. The financing broadens Telekom Srbija’s funding sources and strengthens its links with western technology and development-finance institutions. Export credit, bank facilities and bond financing can extend maturities and support procurement, but they do not provide the permanent capital buffer associated with equity.

Tower infrastructure demonstrates another financing route

Telekom Srbija has already shown that foreign infrastructure investors can participate in individual assets without taking a stake in the parent company. An Actis-led consortium acquired approximately 1,800 telecommunications towers across Serbia, Bosnia and Herzegovina and Montenegro, creating an independent tower company with Telekom Srbija as anchor tenant under a long-term master-services agreement. IFC documentation puts the portfolio at 1,827 sites, including 995 in Serbia, 725 in Bosnia and Herzegovina and 107 in Montenegro. The transaction monetised passive infrastructure while maintaining Telekom Srbija’s access to the towers and included commitments for future construction.

A similar structure could potentially be applied to other assets such as fibre infrastructure, data centres, cloud platforms, enterprise services or international media distribution. Such assets could be placed into separately governed ventures supported by long-term commercial agreements. For infrastructure investors, contracted revenues, pricing mechanisms and identifiable investment programmes can provide a different risk profile from a direct investment in the parent company. A ring-fenced transaction would, however, provide less balance-sheet relief than parent-level equity unless the proceeds were specifically allocated to debt reduction.

Treasury shares provide a potential equity mechanism

Telekom Srbija’s ownership structure offers a direct route for introducing a minority investor. The Republic of Serbia owns 58.11% of Telekom Srbija, while the company holds 20% of its own shares. Individuals own 14.95%, while current and former employees hold the remaining 6.94%. Treasury shares do not carry ordinary voting rights. Rating agencies therefore describe the Serbian state as controlling approximately 73% of voting rights, despite its lower economic ownership.

Subject to Serbian legislation, corporate approvals and government agreement, some or all of the 20% treasury stake could theoretically be placed with a strategic investor. Such a transaction could introduce permanent capital without requiring the Serbian state to sell its existing shares. A full placement of the treasury stake would leave the state with its 58.11% economic majority, while an incoming investor could receive a significant minority interest, board representation and negotiated governance rights.

The structure could therefore be presented as a recapitalisation and strategic partnership rather than a privatisation or transfer of national control.

Equity would need to support deleveraging

For Telekom Srbija, the financial rationale for such a transaction would depend on how the proceeds were used. New equity could strengthen liquidity, reduce leverage and support defined investment programmes in fibre, 5G, cloud and data centres. Using equity primarily to finance another acquisition cycle would dilute existing shareholders without addressing the company’s underlying balance-sheet requirements.

For an external investor, governance would be a central consideration.

Telekom Srbija combines commercial activities with the responsibilities of a state-controlled national infrastructure company. Its position in fixed broadband and television creates substantial market reach while also exposing the group to competition, media-plurality and political scrutiny. A minority investor could seek independent directors, reserved matters for major acquisitions, formal leverage limits, transparent procurement procedures, audited reporting of content obligations and a predictable dividend policy. The investor would also need visibility over the distinction between commercially driven expenditure and projects undertaken for broader state-policy objectives.

e& already has a competing Serbian telecom position

e& would face particular complications as a potential investor because its PPF Telecom platform already controls Yettel Serbia and SBB, which are principal competitors to Telekom Srbija.

A parent-level investment in Telekom Srbija by e& could create competition concerns and potential conflicts involving pricing, infrastructure strategy, content and customer information. The significance of e&’s existing Serbian investments is therefore principally the evidence they provide of Gulf appetite for Balkan telecommunications assets and the valuation precedent established by its transactions. Other strategic telecom operators, sovereign investors and digital-infrastructure funds could approach Telekom Srbija through different structures.

A telecom operator could contribute technology procurement, roaming relationships, enterprise products and operational expertise. A sovereign investor could pursue a longer investment horizon with a minority holding alongside the Serbian state. An infrastructure fund could focus instead on a ring-fenced fibre or data-centre platform with contracted revenues. No such transaction is identified in the available facts; the potential for Gulf equity represents a capital-structure proposition rather than evidence of a disclosed sale process.

Telekom Srbija has expanded its access to international capital

The company has completed cross-border acquisitions, monetised infrastructure with international investors, secured ratings from major agencies, accessed US export finance and raised almost €3 billion equivalent through two international bond transactions.

It has also developed relationships with global banks capable of advising, financing and distributing a potential strategic equity transaction.

The company has expanded its infrastructure and customer base while maintaining a significant position in essential telecommunications services. Its domestic market concentration, recurring household revenues and regional expansion have increased its scale. At the same time, the expansion has generated substantial refinancing requirements, relatively high borrowing costs and differences between management’s adjusted earnings measures and the definitions used by credit-rating agencies. The ownership structure leaves the Serbian state with a clear controlling position while providing a potential mechanism through the company’s 20% treasury stake for introducing permanent external capital without directly reducing the state’s existing economic share.