Telecoms Merger Creates Competition for Vodafone

Telecoms Merger Creates Competition for Vodafone

Telecoms Merger Creates Competition for Vodafone

The fight for market share amongst Spain’s telecommunications firms is gaining momentum in the wake of recent M&A deals.

Last month, business-focused telco Ibercom and mobile virtual network operator (MVNO) MasMovil announced plans to merge and become the third largest operator in the sector.

The agreement will enhance the companies’ capabilities to compete, by integrating fixed and mobile voice and data services.

The tie-up came hot on the heels of Vodafone’s swoop on Spanish cable operator ONO, a move aimed at pushing the UK operator closer to becoming a top European integrated communications provider.

So is further industry restructuring on the cards in Spain?

Well just last week, the newly formed MasMovil Ibercom said it will go ahead with a capital increase to fund more buys to grow its MVNO and wholesale distribution activities.

But what do these war cries from smaller telecos mean for the likes of  Vodafone, currently the second biggest company in the market?

Are they a threat to its position or will they simply ensure the market becomes more efficient?

SPAIN TELECOMS MARKET BEGINS TO REBUILD

Spain’s telecoms sector, like most of its European peers, is only now starting to rebuild as the region slowly recovers from a recession which has forced operators to cut tariffs to hold on to clients. Regulatory hurdles have also dampened profits.

Telefonica has maintained its dominant position, but has not been immune to the downturn at home, as cash-strapped Spaniards have shopped around for cheaper internet and phone offers.

But as the economic environment improves, focus in the telecoms industry has been shifting towards “quad play,” which involves providing bundles of phone, broadband, mobile and paid-TV services.

After its buy of ONO, building on last year’s acquisition of Germany’s Kabel Deutschland, Vodafone is in a strong position, piling pressure on rivals like Telefonica to do similar deals.

And MasMovil Ibercom’s joint venture will now add to that pressure.

MORE INDUSTRY M&A IN THE PIPELINE

As expectations for more industry M&A heat up, other players like France Telecom’s Orange and Yoigo, owned by Sweden’s TeliaSonera, are back on analysts’ radars.

Vodafone and Orange have already teamed up to build a fibre network in major cities, challenging Telefonica in the high-speed broadband market.

But Orange has also been tipped as a possible partner for Jazztel, Spain’s fourth biggest operator.

Mobile network Yoigo has been up for sale for several years and is thought to have been a target of Vodafone for some time.

So there are no shortage of potential consolidation deals in the pipeline!

If you’re interested in a deal in Spain’s telecoms industry, contact corporate law firm Argali Abogados.

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