Spain's Ono eyes listing, could trigger telcos deals
MADRID (Reuters) - Spain's main cable operator Ono is considering an initial public offering for some of its shares in the first half of 2014, two sources with knowledge of the matter said, a move which could speed up consolidation in the pressured Spanish telecom sector.
While the sources noted that no final decision had yet been made on whether to partially list the company, they said Ono's management was keen to take advantage of renewed interest in Spanish assets from foreign investors and of a slight uptick in the country's economic performance to move ahead with the plan.
If confirmed, it would be the second initial public offering (IPO) of a European cable firm in a few months, after France's Numericable last month raised 652.2 million euros ($895 million) to help cut debt and upgrade its network.
"They've seen the strong demand for Numericable shares in France and they want to push on with the listing," said one of the sources on condition of anonymity.
Business daily Expansion said on Tuesday the plan could take the form of a share offering coupled with a capital increase and that both moves would likely be discussed at Ono's next board meeting, due in the next few weeks.
Ono, which has repeatedly said in the past that going public was a possibility, declined to comment.
The cable operator posted a 15-million-euro loss in the nine months to September and its TV business is losing clients as cash-strapped Spaniards cut leisure spending, but its optic fiber network could be an asset for telecom operators eager to sell high-margin data services.
The sources said Ono, once partially listed, would likely be a takeover target for bigger competitors Vodafone (VOD.L) and Orange (ORAN.PA), which are trying to capture a larger share of the Spanish market to make headway against former monopoly Telefonica (TEF.MC).
"A listing would put a price on the asset and make it a palatable target for the likes of Vodafone or Orange, whose margins have been seriously pressured by the ongoing war on prices," said the source.
Most Spanish telecom operators have been offering cheaper deals over the past few months in a bid to retain clients.
The trend was triggered after Telefonica last year launched a so-called quadruple-play offer which bundles fixed and mobile phone contracts with internet and TV services and is sold at a cheaper price than each service individually.
Analysts believe the price war is laying the ground for market consolidation with smaller players Ono, Jazztel JAZZ.MC and Yoigo, owned by Teliasonera (TLSN.ST). in the spotlight.
"Vodafone's urgent need to compete more with Telefonica's proactive quadruple-play offer means cable operator Ono and Jazztel could be potential targets," said Deutsche Bank in a note released to clients on Tuesday.
The second source also said that Orange had been looking at ways to boost its Spanish business although any specific move would have to wait until next year and a possible change in the management of the French company.
Ono could benefit from a comparatively cheaper valuation than Jazztel JAZZ.MC, whose shares have risen more than 44 percent this year.
But it also needs to address falling profits and high debt to lure investors. Ono's debt, at 4.65 times its earnings before interest, taxes, depreciation and amortization is high in comparison with peers.
"In order to move ahead, they need one or two quarters of good earnings and profit, a less competitive environment and Spanish good macroeconomic data," said the second source.
Consumer spending has showed recent signs of stabilizing and Spanish authorities expect the economy to grow between 0.2 percent to 0.3 percent in the last quarter of the year and to expand by at least 0.7 percent in 2014.
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