Eltel has signed a letter of intent (LoI) to sell its Danish rail operations to infrastructure solutions provider Strukton Rail.

Both parties are expected to finalise the definitive transaction by the end of this month.

"The deal would see Strukton Rail acquire Eltel’s current maintenance contract with Sund & Bælt, in addition to the transfer of 26 employees and operational equipment."

The deal would see Strukton Rail acquire Eltel’s current maintenance contract with Sund & Bælt, in addition to the transfer of 26 employees and operational equipment.

It is expected to have an estimated negative EBITA effect of kr7.7m ($1.25m) and a negative cash flow effect of kr18m ($2.91m), which is anticipated to occur in the last quarter of 2017 and first quarter of this year.

The contract is valid until March next year and features a one-year extension option.

Eltel originally announced its intention to focus on its core businesses of power and communication within Nordic region, Germany and Poland in February last year.

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By GlobalData

Accordingly, the company aims to divest its rail operations, which are classified as its non-core business.

Eltel also signed a deal to divest its Finnish rail business operations to infrastructure constructor Graniittirakennus Kallio in November last year as part a deal valued at €8.5m.

Eltel’s Finnish rail business operations generated net sales of €28m in 2016 and are primarily focused on the delivery of railway, metro and light rail electrification and signalling systems.

The company is also currently undertaking the divestment of its rail operations in Sweden and Norway.