* Vodafone seeking to head off Ono's planned IPO
* Deal seen topping 7 billion euros
* Analysts caution about high price
LONDON/MADRID, Feb 10 (Reuters) - Britain's Vodafone has offered to buy Spain's largest cable operator Ono from its private-equity owners, two people familiar with the situation said, in a deal that could top 7 billion euros ($9.5 billion).
Telecom operator Vodafone is seeking to persuade Ono, which sells fixed and mobile phone, TV and internet services, to drop its plans for a stock market listing intended to capitalise on high investor interest in European cable firms.
This interest reflects how consumers are increasingly turning to cable companies for television and high-speed broadband at faster speeds and often lower prices than from telecom companies.
Cable also offers the prospect of better returns for telecoms operators after years of slashing prices on mobile phone deals and other services to retain cash-strapped European customers.
Vodafone's offer, ahead of the Spanish company's board meeting on Tuesday, was its second after the first was rejected as "unacceptably low", according to a third person familiar with the deal.
While Ono's owners have been considering an initial public offering (IPO), they may now opt for a straight sale as U.S. cable firm Liberty Global has also expressed an interest in recent weeks.
While people familiar with the matter have told Reuters that Ono believes it has an enterprise value of at least 7 billion euros ($9.5 billion), other sources have said that any buyer could have to pay up to 9 billion euros.
The cable sector trades on an enterprise value to 2013 core profit (EBITDA) multiple of 9.4 times, according to Reuters data. Ono had core earnings of 752 million euros for 2012, which at the sector multiple of 9.4 times would give an enterprise value of 7.1 billion euros.
A source familiar with the situation earlier told Reuters that any buyer would have to pay 10 to 12 times operating profit if it hoped to preempt the IPO.
"It's clear now that Vodafone is interested so if it can get to an offering price that the investors will accept - one which reflects the value of the IPO and the long-term potential of the business - then it will likely get its hands on the company," the third source said.
The two groups declined to comment on Monday while private equity funds Providence Equity Partners, Thomas H. Lee Partners, CCMP Capital Advisors, and Quadrangle Capital, who own 54 percent of Ono, either declined to comment or could not be reached.
The second bid by Vodafone, which is investing in its networks after selling its U.S. arm for $130 billion, fits with its new strategy of acquiring broadband assets to allow it to offer bundled services to consumers and offload traffic from its mobile networks.
The world's second-largest operator by subscribers is also likely to be wary of what happened in Germany after it walked away from a bid for KDG in 2010 - only to return once it had floated on the stock market with a much higher price.
Its desire for fixed-line assets has put it up against billionaire John Malone's Liberty Global which has also been on a spending spree to increase the size of its empire in Europe, where it derives more than 90 percent of its revenue.
The two firms fought to buy Germany's Kabel Deutschland last year, with Liberty forcing Vodafone to raise its offer to 7.7 billion euros. Liberty also bought Britain's Virgin Media for $15.8 billion last year, and has just agreed to pay 10 billion euros for Dutch cable operator Ziggo.
Many analysts question whether Liberty could fund another deal so soon after Ziggo. Analysts and sector bankers also say the deal makes more sense for Vodafone.
In Spain, where a long recession has reduced the sums consumers are willing to pay for telephony, Vodafone has been working with Orange to build a fibre network in major cities, mainly Madrid and Barcelona, to offer a wider range of services.
A deal for Ono could work well as the Spanish company is more focussed in smaller cities and rural areas and analysts say it would be a stronger fit than with Liberty.
However with Vodafone's entire Spanish business valued by bankers at between 3.5 billion and 5 billion euros, spending 7 billion euros in what many see as a defensive move against market leader Telefonica is causing some analysts concern.
Macquarie analyst Guy Peddy said Vodafone's interest showed how the group needed better infrastructure to compete with Telefonica but he noted that deal multiples for cable companies were invariably higher than for telecom firms.
"Ono is really not growing, so it is a substantive multiple for that, and it would be tantamount to a quite material increase in their investment in Spain," he said. "We can understand why they are doing it but we are always fearful of the price."