Vodafone’s €7bn swoop for Ono to trigger new wave of takeovers
Deal marks Vodafone's third purchase of a European fixed-broadband asset in two years
Tuesday 18 March 2014
City analysts are forecasting that Vodafone’s €7.2bn (£6bn) takeover of Spanish broadband and pay-TV firm Ono will trigger a wave of merger and acquisition activity across Europe.
Vodafone’s swoop for Ono is part of its strategy of diversifying beyond mobile as phone revenues hit a plateau and customers increasingly look to one telecoms supplier for mobile, broadband, home phone and pay-TV, dubbed a “quad play”.
Most analysts welcomed Vodafone’s long-anticipated Ono deal as they said it strengthened the British company’s position and heaped pressure on Telefonica, the Spanish owner of O2, and Orange, the French joint owner of Britain’s EE, to do similar deals.
“It’s the start of a whole new set of M&A stories, pan-European,” declared Robin Bienenstock of Sanford C Bernstein bank. “You start to see cross-border stuff.”
Vodafone’s chief executive, Vittorio Colao, said the FTSE 100 giant has already been changing radically as it has expanded beyond its core mobile business. “Vodafone is becoming a very different company to the company it was two years ago,” he said. “We are more a unified communications provider, not just a mobile one.”
The Ono deal follows Mr Colao’s €7.7bn purchase of the German cable and pay-TV firm Kabel Deutschland last year and the £1bn takeover of the British fixed-line broadband company Cable & Wireless Worldwide in 2012.
Other telecoms firms have also been consolidating in Europe as broadband and TV converge. The US giant Liberty Global has bought Britain’s Virgin Media and Holland’s Ziggo, and AT&T is also on the prowl, though it has ruled out a bid for Vodafone for at least six months.
Mr Colao said Vodafone was willing to invest organically as well as to acquire businesses, noting that he is building fibre networks in Portugal and Italy as part of Vodafone’s expansion into broadband and TV.
Espirito Santo bank said Vodafone could be “planning to make acquisitions in Europe, including the UK” after the Ono deal, but Mr Colao played down an imminent UK takeover move. The next chapter in Vodafone’s history is “not just an M&A chapter”, insisted Mr Colao, who has money for acquisitions after Vodafone’s bumper sale of Verizon Wireless.
He pointed out that 50 per cent of Vodafone’s British business is focused on enterprise – servicing business customers – unlike in the rest of Europe, where enterprise business makes up only 30 per cent of the total.
Vodafone has no need to start offering a quad play in the UK, Mr Colao said, even though he is doing so in Germany, Spain and Portugal. He also ruled out a bid for either ITV or Channel 5.
Analysts suggest Mr Colao could strike a deeper partnership with BSkyB, which already has a deal to let Vodafone customers access Sky Sports’ mobile clips. Some say he could also mount a bid for the telecoms provider TalkTalk, although analysts at Bernstein dismissed that idea as it has “almost none of the ‘rationale and synergy’ boxes that Ono ticked in Spain”.
Vodafone gains 1.9 million customers from Ono and reckons it can sell more services as Spain’s biggest cable firm has a network that already “passes by” 7 million homes.
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