Vodafone Snaps Up Spain’s ONO for $10 Billion

Vodafone Snaps Up Spain's ONO for $10 Billion

Vodafone Snaps Up Spain’s ONO for $10 Billion

Vodafone has moved closer to its goal of becoming a top European integrated communications provider with its recent swoop on Spanish cable operator ONO.

The UK telecommunications giant wrote a $10 billion cheque for ONO, including debt, digging deep into the $130 billion war chest raised from the sale of US mobile operator Verizon Wireless last September. Vodafone said it planned to invest part of the proceeds from the disposal to boost its networks, but selected M&A deals were also expected by analysts.

ONO is the third European fixed-broadband acquisition for Vodafone in two years as it seeks to improve its networks and beef up its European operations battered by tough competition, regulatory hurdles and the economic downturn.

ONO sells fixed and mobile phone, TV and internet services.



Following the ONO acquisition – which is still awaiting regulatory approval – Vodafone will become Spain’s second-biggest telecoms operator, challenging the dominance of Telefonica.

But apart from helping it to square up to the industry top dog, what are the advantages for Vodafone from the tie-up with ONO?

• Consumers are increasingly turning to cable companies for television and high-speed broadband at faster speeds and often lower prices than from telecoms companies.

• Cable also offers potentially better returns for telecoms operators after years of slashing mobile phone prices to keep customers.

• ONO, with 1.9 million customers in Spain and a high-speed network that can reach 7 million homes, is a good fit for Vodafone, generating substantial cost synergies.

The price Vodafone paid for ONO was 10.4 times the company’s free operating cash flow, close to the top end of the range a cable company is currently going for in Europe. But the price also reflects the value of the planned stock exchange listing which ONO’s former majority shareholders – a group of private equity firms – had already approved. Vodafone successfully pre-empted this move, guaranteeing a new growth story for the group in one of its key European markets.



The global telecoms industry has been a hub of M&A activity in past months as focus has been shifting towards “quad play.” This involves providing bundles of phone, broadband, mobile and pay-TV services.

With last year’s 7.7 billion euros acquisition of German cable and pay-TV firm Kabel Deutschland and now the ONO buy, Vodafone is in a strong position in this new environment, piling pressure on rivals like Telefonica to do similar deals.

Other telecoms firms have already been consolidating in Europe as broadband and TV converge. And with cash still in hand from the sale of its US business, Vodafone is likely to continue on the acquisition trail.

For information on the Spanish telecoms sector, contact corporate law firm Argali Abogados.

Leave a Reply