Telecom giant Vodafone has revealed that its Greek subsidiary will acquire local rival Cyta Hellas in a €118 million ($145 million) deal that will strengthen its fixed and mobile capabilities and leave Greece with just three network operators.
Cyta Hellas had been up for sale since late 2016 and Vodafone Group plc (NYSE: VOD) was reported to have faced bidding competition from Wind Hellas, another local network rival. Hong Kong's PCCW Ltd. (NYSE: PCW; Hong Kong: 0008) was also previously reported to have shown interest in Cyta, ultimately deciding not to bid for the company.
Cyta serves around 300,000 fixed broadband customers in Greece, giving it an 8% share of that market, as well as 40,000 mobile customers. But it has never turned a profit, according to press reports.
Vodafone had about 5.5 million mobile customers in Greece at the end of September, as well as 643,000 fixed broadband subscribers. Its Greek business made €440 million ($540 million) in revenues in the six months ending in September, and €56 million ($69 million) in adjusted operating profit. Revenues were up 2% and operating profit about 14% on the figures for the year-earlier six-month period.
Vodafone's interest clearly lies in Cyta's fixed-line assets. Besides serving 8% of the Greek broadband market, Cyta owns fiber-optic infrastructure that will support higher-speed connections.
The move is also consistent with Vodafone's group strategy of expanding further into the fixed-line market. With extensive fixed and mobile assets, the operator can support the full range of broadband, TV and mobile services. More fixed-line infrastructure could also make it less dependent on wholesale agreements with national incumbents, such as OTE S.A. in the Greek market.
Mobile-only operators developing broadband offerings have typically been forced to rent capacity from fixed-line incumbents. They have also used incumbents' fixed-line networks for mobile "backhaul" -- the connection between mobile base stations and core network systems.
Vodafone has already snapped up fixed-line businesses in Germany and Spain in recent years and in late 2017 announced a partnership in the UK with CityFibre, a local fiber operator that is casting itself as a higher-speed wholesale alternative to BT Group plc (NYSE: BT; London: BTA). Last week, CityFibre and Vodafone said they would start rolling out a fiber-to-the-home network in the UK city of Milton Keynes. (See Vodafone, CityFibre Take Their Gig to Concrete Cowland.)
The acquisition of Cyta is Vodafone's second deal in Greece in the last few years. In November, it paid €72.7 million for a controlling 72.7% stake in Hellas Online, having previously owned 18.5% of the company. That move gave Vodafone the broadband business on which it hopes to build with the takeover of Cyta.
Vodafone did not disclose other details about the financial terms of the Cyta deal, which still requires the approval of competition authorities.
— Iain Morris, News Editor, Light Reading