Orange Buys Up Jazztel in Spanish Market

Orange Buys Up Jazztel in Spanish Market

Orange Buys Up Jazztel in Spanish Market

As Spain’s economic recovery continues, and both the government and international organisations like the International Monetary Fund (IMF) upgrade their growth forecasts, M&A deals are thriving!

The latest protagonist is French telecoms operator Orange which last month won approval from Spanish regulators for its 3.4 billion euros buyout of local broadband and cellphone operator Jazztel PLC.

The European Commission gave the deal its green light after Orange agreed to a package of divestments and network-sharing agreements to help launch a new telecoms operator in Spain.

Orange announced the acquisition in September last year and its swoop on Jazztel, a listed company, will create Spain’s second largest telecoms operator.

The purchase of its smaller rival will almost double Orange’s market share in broadband internet access, adding another around 1.5 million broadband subscribers.

 

ORANGE, JAZZTEL: BETTER TOGETHER

Orange is offering Jazztel shareholders a price of 13 euros per share, representing a 34 percent premium to the stock price before the bid was launched on September 16, 2014.

Without doubt a sizeable premium, but Orange has long had its sights on Jazztel to add fixed-line broadband customers to its mainly mobile operations in Spain.

Spain is a key market for the French group and it is  convinced that Jazztel and Orange are better together than on their own, despite the fact that both companies have increased their profitability and market share significantly over the last few years.

The tie-up is expected to generate synergies of over 1.3 billion euros.

 

TELECOMS SHAKE-UP SPILLS TO MEDIA

Spain’s telecoms market is no stranger to consolidation as local and foreign firms have spent the last few years trying to knock incumbent Telefonica off its pedestal.

Competition heated up three years ago when Telefonica took the market by storm with its very attractively priced fixed-mobile bundle “Fusion“.Fearing it would be outmanoeuvred, UK operator Vodafone began to sniff around and snapped up cable operator ONO last year, with the aim of becoming a top European integrated communications provider.

Now Orange’s purchase of Jazztel will enable it to compete directly with Telefonica and Vodafone.

Orange’s subsidiary in Spain has announced plans to provide 10 million homes with access to fibre optic and 4G network in 2016. But while Orange and Vodafone continue to square up to Telefonica in the data business, the Spanish telecoms giant has recently had its 706 million euros full buyout of pay-TV outfit Canal+ approved by stock market regulator CNMV.

As one of the conditions of the deal, Telefonica will make 50 percent of the content of its premium channels available to rival operators at wholesale, including premium sports services.

So it seems Telefonica is still calling the shots both in media and telecoms!

For more information on investing in Spain, contact corporate law firm Argali Abogados.

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