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IPO

Euskaltel IPO Could Support M&A, 4G Rollout

Spanish broadband operator Euskaltel plans to carry out an initial public offering (IPO) that could support future deal-making in the country's recovering telecom market.

Euskaltel is the market leader in the Basque region of Spain and believes the IPO will give it the financial wherewithal to strengthen its position and expand its business activities as economic conditions begin to improve.

The operator -- whose current shareholders are Kutxabank, International Cable and Iberdrola -- says it made €321.2 million (US$361.7 million) in revenues and €155.9 million ($175.6 million) in EBITDA last year.

It aims to roll out a 4G network and lure more ADSL customers to its higher-speed fiber broadband access network, which now covers about 85% of homes in the Basque region.

It also said it would "contemplate value-accretive strategic acquisitions" in a statement on the IPO plans.

Currently, Euskaltel provides mobile services through an MVNO agreement with Orange Spain but it could be interested in buying both fixed and mobile assets following its public listing.

A possible target may be Telecable, another cable operator based in Asturias in northern Spain.

Majority owner Carlyle, a private equity company, is thought to be keen on selling its 85% stake in Telecable and was last month reported to have hired Goldman Sachs as an advisor on a potential sale.

Euskaltel will also be keen to defend itself against emerging "quad-play" rivals -- companies that can offer the full range of fixed voice, broadband, TV and mobile services to Spanish consumers.

Interest in quad-play has already triggered a wave of consolidation in the Spanish telecom market, with mobile operators Vodafone España S.A. and Orange buying cable companies ONO and Jazztel plc respectively, and Euskaltel says that "mobility is at the heart" of its bundled-services strategy. (See Fiber Sizzles in Spain as Orange Targets Jazztel.)

The operator served 295,360 residential customers in March and claimed that 57.6% of its subscribers were using triple- or quad-play services in the January-to-March quarter.

Although Euskatel's base of mobile postpaid customers has grown by 8% since the end of 2014, the operator could find itself in a much stronger position against rivals with its own 4G network.

"We believe that as a result of our market leading positions in the Basque country, strong brand and fully invested network, we are now uniquely positioned to take advantage of the current inflexion point in the market and drive Euskaltel's growth forward," said Alberto García Erauzkin, Euskaltel's chairman, in a company statement.


For more fixed broadband market coverage and insights, check out our dedicated broadband content channel here on Light Reading.


Besides helping it to grow its business, Euskaltel said the IPO would allow it to improve efficiency and profitability and therefore "drive attractive shareholder returns."

The operator did not provide details of sales growth last year but said revenues were 2.1% higher in the January-to-March quarter than in the same period of 2014.

Last month, incumbent operator Telefónica claimed that Spain had "already begun its return to growth" in a statement accompanying the publication of financial results for the first three months of the year. (See Telefónica Boosted by German, UK M&A.)

After suffering for several years, Spain's economy is expected to grow at a faster rate than the European Union average in 2015.

Telefónica's revenues shrank by 3.8% in the January-to-March quarter, compared with the same period in 2014, but the operator believes it can reduce the rate of contraction by 1.1 percentage points each quarter, eventually returning to growth in the first three months of 2016.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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