Másmóvil, Spain's fourth-largest operator – a status it seems uncomfortable with – announced yesterday a takeover bid for Basque operator Euskaltel.

The deal on the table, at €11.17 ($13.16) per share, values Euskaltel at around €2 billion ($2.4 billion). Másmóvil said it had already secured "irrevocable agreements" to accept the offer from Euskaltel shareholders representing 52.23% of the Basque operator's capital. The price per share is a 26.8% premium on the weighted average price of Euskaltel's shares over the last six months.

Figure 1: Going local: Euskaltel was a regional player until 2020, when it expanded under the Virgin brand.
(Source: Euskaltel)

Euskaltel's board of directors, according to documentation associated with the proposed takeover, "agreed on March 17, 2021 to consider the offer friendly and attractive." To get the deal over the line, Másmóvil, backed by private equity firms Cinven, KKR, and Providence Equity Partners, said it wanted at least 75% plus one share of Euskaltel's capital.

Should the deal get all necessary regulatory approvals, and the private equity firms' get their desired level of shareholder acquiescence, MasMovil said it would maintain the Euskaltel, R, Telecable and Virgin brands.

Traditionally a regional player, Euskaltel branched out nationally last year under the Virgin brand. It has around 840,000 residential and business customers, with an annual turnover of €2.7 billion ($3.2 billion).

Másmóvil said the takeover would accelerate national investment in both FTTP and 5G networks, and implied it would be much better placed to compete with Spain's "big three": Telefónica, Orange and Vodafone.

Itching for growth

Since the trio of private equity firms completed its €5.3 billion ($6.3 billion) buyout of Másmóvil last November, rumors have intensified about the operator's potential role in the consolidation of Spain's hyper-competitive telecoms market.

A mooted tie-up with Vodafone now seems all but dead, however, if the Euskaltel deal goes through, however.

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Growth outside Spain might also be a possibility.

Másmóvil CEO Meinrad Spenger told employees in an internal memo that the company's new owners considered their acquisition an "excellent growth platform both in Spain and outside our country, and an excellent opportunity to continue creating value in our company and in the telecommunications market."

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— Ken Wieland, contributing editor, special to Light Reading