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Video services

ONO Says Yes to Vodafone

Vodafone has dipped into its fat wallet, swelled by the recent sale of its US assets, and struck a €7.2 billion (US$10 billion) deal to buy Spanish cable operator ONO, the two companies announced Monday morning, ending weeks of speculation. (See Vodafone to Buy ONO for €7.2B and Vodafone Agrees to $130B Verizon Stake Sale.)

The deal, which carries no debt or cash, adds 1.9 million customers (including about 120,000 small businesses) to Vodafone's operation in Spain, where it already has 13.6 million mobile customers and where it is building out fiber-based fixed broadband connections to 1.5 million Spanish homes. The deal will also swell Vodafone's headcount by about 2,500 staff. (See Euronews: €1B Boost for Spanish FTTH.)

Vodafone Group plc (NYSE: VOD) aims to take advantage of ONO 's relatively modern network infrastructure, in which the Spanish operator has invested €7 billion ($9.74 billion) since 1998, and sell bundled services to the 7.2 million homes passed by ONO's access network. ONO has upgraded its entire network to DOCSIS 3.0 and offers cable broadband at speeds in excess of 200 Mbit/s, while its video service includes a Tivo-based option. Vodafone is in the process of upgrading its Spanish mobile network to 4G LTE. (See Euronews: Vodafone Wins Spain's 4G Race, TiVo Surpasses 2.5 Million Subscribers in Europe, and ONO Will Go Full Throttle.)

ONO, which was set for an IPO and which has also attracted acquisition interest from European cable giant Liberty Global Inc. (Nasdaq: LBTY), generated revenues of €1.6 billion ($2.23 billion) and reported a slight net loss of €25 million ($34.8 million) in 2013. (See Euronews: Vodafone Homes In On ONO.)

The ONO acquisition deal had been expected by the financial markets, and so has had little impact on the mobile operator's stock. Vodafone, which has more than 410 million mobile customers worldwide, and which generated revenues of £11 billion ($18.3 billion) in its fiscal third quarter that ended December 31, 2013, saw its share price rise by 3 pence, or 1.3%, to 225 pence on the London Stock Exchange at lunchtime.

The ONO deal is the latest move in a battle between Vodafone and Liberty Global to dominate the European cable services market. (See Euronews: Rivals Set for Cable Asset Battle.)

Liberty is seeking economies of scale from acquisitions such as Virgin Media in the UK and Ziggo in the Netherlands, while also seeking to add its own mobile services to its existing triple-play packages. (See Euronews: Liberty Global Plans Pan-European MVNO, Liberty Global to Buy Ziggo for €10B, and Liberty Makes $23.3B Play for Virgin Media.)

Vodafone, meanwhile, is seeking to combine its mobile, fiber-based fixed broadband, and enterprise services with cable network assets that can add video delivery, additional high-speed broadband, and data transport (including mobile backhaul) capabilities to its European assets. The mobile giant recently completed the acquisition of cable operator Kabel Deutschland GmbH , a move that gives it more than 32 million mobile subscribers, around 5 million broadband, and 7.6 million cable TV customers in Germany. (See Euronews: Vodafone Clears Hurdle to Kabel Bid and Vodafone Germany And Kabel Deutschland Integration To Begin From 1 April 2014.)

— Ray Le Maistre, Editor-in-Chief, Light Reading Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile

albreznick 3/18/2014 | 9:02:59 PM
Re: Competitive landscape good question, Mitch. It should boost the competitive landscape in voth Spain and all of Europe, especially if it keeps Liberty Global from being an even bigger goliath than it already is. .  
albreznick 3/18/2014 | 9:01:22 PM
Re: What's in an acronym? It probably doesn't have quite the same meaning in Spanish. So I doubt they worried about that. :) 
Mitch Wagner 3/17/2014 | 12:49:14 PM
Competitive landscape Will this deal have a significant effect on the competitive landscape in Spain? In Europe in general? Sounds like ONO was a relatively small company, with some technology that might be significantly helpful to Vodafone, making the acqusition an improvement for competition. 
Ariella 3/17/2014 | 10:55:17 AM
What's in an acronym? I wonder didn't ONO do any market research that warned the company off adopting a name that sounds like, Oh no? They could have adopted Mr. Bill as their mascot. 
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