Vodafone in $10 billion cable deal with Ono to take on Telefonica

Vodafone Group has finalized its $10 billion deal to acquire Spanish cable operator Ono. The deal will enable Vodafone to take on Telefonica in the broadband space and save EUR 240 million annually.

Last year, it bought Kabel Deutschland.

The British telecom group is looking at rebuilding its European operations with a broadband offering by the acquisition of Spain’s largest cable operator.

Last year, Vodafone acquired Kabel Deutschland Holding in deal valued at more than $10 billion.

Also read: Vodafone looks for telecom, cable assets for acquisition

On 11 February 2014, Vodafone Group Chief Executive Vittorio Colao said that the European telecom operator has the capability to spend around $40 billion on acquisitions in coming years. Vodafone will receive $130 billion from a deal with Verizon Wireless to exit from the American telecom market.

Vodafone Group plans to use Kabel Deutschland Holding as the core of its fixed-line business in Germany and potentially other countries.

The company, seeking to revive growth, is targeting new services such as security to expand beyond the wireless business.

Vodafone is also looking at acquiring Tata Communications and Tata Teleservices in India.

Also read: Vodafone third quarter Capex up 21% to $2.9 billion

The telecom operator is one of the targets of American mobile service provider AT&T.

Vodafone buys Ono

Vodafone- Ono deal

In 2013, Ono generated earnings before taxes of EUR 686 million. It has 1.5 million broadband, 1 million mobile phone users, while its fiber-optic services reach 7.2 million homes in Spain.

Vodafone said on Monday the deal would enable it to offer a combination of mobile and fixed-line telephony, pay-TV and broadband in one of its largest European markets, hit hard by fierce competition and the effects of a lengthy recession, Reuters reported.

The deal for private equity-owned Ono is Vodafone’s third purchase of a European fixed-broadband asset in two years, allowing it to offer an increasing range of services and offload some of its mobile traffic on to Ono’s cable network.

The British group, which is rebuilding its core European networks with proceeds from the $130 billion sale of its U.S. arm, said it would also save around 240 million euros, before integration costs, by the fourth full year after completion.

“The combination of Vodafone and Ono creates a leading integrated communications provider in Spain and represents an attractive value-creation opportunity for Vodafone,” Colao said.

Having built the network later than other cable and telecom companies, it can achieve broadband speeds of up to 200 megabits per second, or up to 20 times the average of rival networks. The deal for Ono, which is mostly present in more rural parts of Spain, also complements the cable network Vodafone has begun building with Orange in major Spanish cities.

Ono is 54 percent owned by investment funds Providence Equity Partners, Thomas H. Lee Partners, CCMP Capital Advisors and Quadrangle Capital.