Vodafone agrees $10 billion deal for Spain's Ono

Mon Mar 17, 2014 2:21pm EDT
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By Kate Holton

LONDON (Reuters) - Vodafone has agreed to buy Spain's largest cable operator Ono for 7.2 billion euros ($10 billion), the latest hefty deal in a European telecoms sector starting to rebuild as the region recovers from a recession.

The British group said on Monday it would use some of the $130 billion proceeds from the sale of its U.S. arm to acquire Ono, with a superfast cable network and 1.9 million customers, to create a stronger challenger to market leader Telefonica.

The deal for private equity-owned Ono is Vodafone's third purchase of a European fixed-broadband asset in two years, following similar moves in Britain and Germany, enabling it to offer fixed-line and mobile services, pay-TV and broadband, while saving money on building and operating its networks.

The agreement, which comes as the French market undergoes a similar transformation, could also spark more consolidation within Spain as players such as France's Orange seek out acquisitions to avoid falling behind.

Orange has been linked with Jazztel, Spain's fourth-biggest telecoms operator, while Yoigo, owned by Sweden's Teliasonera, is also seen as a likely target, analysts say.

Shares in Vodafone were up 1.4 percent in midday trading, outperforming the FTSE 100 index, and shareholders have generally been supportive.

"Historically, Vodafone has been a pure mobile operator," Henri Tcheng, a partner at consultants BearingPoint said. "But the future of telecoms includes convergence between very high-speed broadband, mobile and fixed so I would describe this as a compulsory move for Vodafone.

"It is quite a high valuation, but in any given country the cable operator is in a unique place for mobile operators. So even if it is expensive, it is not a bad deal."   Continued...

An employee smiles at an Ono shop in Leganes, near Madrid, March 17, 2014. REUTERS/Paul Hanna