Cable operator Ono sees pick-up in investor interest in Spain

BARCELONA Mon Feb 24, 2014 2:58pm EST

BARCELONA (Reuters) - With the beginnings of an economic recovery taking hold, Spanish cable telecoms operator Ono believes the time is ripe for attracting international investors in a share market listing which would help it pay down its debts, it said on Monday.

"Capital is returning to Spain. After five difficult years, things are changing quite rapidly, which is very good news for us," said Rosalia Portela, the chief executive of the private equity-backed group, in an interview.

Ono, which is saddled with 3.3 billion euros ($4.5 billion)in debt after a leveraged buy-out and investment in its network, is preparing for an initial public share offer which its shareholders will vote on at a meeting in mid-March.

Whether the IPO will come to pass depends on whether Britain's Vodafone comes up with a more attractive offer to buy Ono as part of its expansion in fixed line networks to better enable it to offer bundled services.

Vodafone has already approached some of Ono's private equity owners about a bid that could top 7 billion euros, and European cable operator Liberty Global could also be interested, sources familiar with the matter have told Reuters.

However, when asked about the option of a sale, Portela said a bid by Vodafone was not discussed at the last board meeting and that her focus was on preparing the business for a share listing.

Ono, which sells fixed and mobile phone, TV and internet services, has 1.9 million customers on its network that covers 70 percent of Spain, or 7.2 million households out of a total of 16 million.

Having built the network later than other cable and telecom companies, Ono boasts of having broadband speeds of up to 200 megabits per second, or up to 20 times the average speeds of rival networks.

In the fourth quarter it also reversed several quarters of customer losses caused by pressure from rivals including Telefonica, Vodafone, and Orange pushing discounted all-inclusive bundles of services.

Portela said prices had stabilized since last summer, after aggressive tactics by leader Telefonica sparked a more than 20 percent fall in prices of bundled services.

As a result, Ono believes it is now in a position to tap in to the strong investor demand for cable businesses that has been witnessed across Europe as all-inclusive bundles of television, broadband Internet, mobile and fixed-line calls gain in popularity.

Cable companies like France's Numericable have already made successful initial public offerings, while others including Ziggo in the Netherlands and Virgin Media in Britain were bought out last year at high valuations.

"Our network is best in class in Europe," Portela told Reuters at the Mobile World Congress trade fair on Monday.

"Most of the investment in upgrading the network to higher broadband speeds is already done, and we have already launched advanced TV services like Tivo."

CONSOLIDATION

Vodafone's interest in the Spanish group is part of its strategy of buying or building out high speed fixed lines to complement its mobile services, enabling it to sell an increasing range of services to customers.

The fixed line network would also enable the group to offload mobile traffic on to the higher capacity infrastructure and Vodafone has already bought fixed line businesses in Germany and Britain.

Speaking at the same conference, Vodafone's chief executive Vittorio Colao told reporters he was still interested in broadband assets in Spain but would for now focus on the fiber network it is building in major cities with partner Orange.

"We will see whether things will change," he said, in reference to Ono moving ahead with its IPO preparations.

"If they believe this is the best way forward for their investors and their future investors, I have to respect their judgment and continue with my plan."

However, Portela said the cable industry in Spain could also be set for a round of consolidation in which Ono would like to play a role.

Ono is absent from three regions in Spain: Asturias where the local player is Telecable, Galicia where R Cable operates, and the Basque Country where Euskaltel operates. All three cable groups are owned by private equity funds.

"These (owners) have said they would be willing to sell their companies if they see good opportunities, so there is room for consolidation," said Portela.

Carrying out acquisitions is not part of Ono's growth plan as laid out in the IPO pitch, she added, but if consolidation "happens in the future we'll see if we can participate."

Meanwhile Colao noted that when Vodafone made acquisitions, he tended to keep local management in place. "Maybe you want to tell this to the Ono people," he said.

When told of Colao's remark, Portela replied: "Thank you - you can tell him that that's nice to hear." ($1=0.7285 euros)

(Editing by Greg Mahlich)

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