* Ono board expected to discuss IPO, Vodafone offer
* Combined entity would be strong competitor for Telefonica
* Analysts, investors say potential deal to top 7 bln euros
By Julien Toyer and Kate Holton
MADRID/LONDON, Feb 11 Directors of Spain's
largest cable operator Ono met on Tuesday to weigh up whether
they should accept a takeover offer from Britain's Vodafone
or push ahead with their original plan to list the
company on the stock market.
Ono, which sells fixed and mobile phone, TV and internet
services, had been preparing for a 7 billion euro ($9.6 billion)
stock market sale to capitalise on high investor interest in
European cable firms when the British telecoms operator
approached its private equity owners about a takeover.
A combined entity, building on Vodafone's strength in mobile
services and Ono's position in broadband internet and TV
packages would offer the biggest challenge yet to Spanish market
leader and former monopoly Telefonica.
In response to a five-year economic downturn, Telefonica has
turned the market ultra competitive by folding the four services
of mobile, fixed-line, broadband and pay-TV into one cheaper
offering for cash-strapped consumers.
With one offer already rejected as too low by Ono, Vodafone
is now having to decide how much it is willing to pay for a
company that is no longer growing.
All operators in Spain have slashed prices and reduced
margins to keep customers and the prospect of a quick rebound
following the end of the recession last year is weak, with more
than a quarter of the workforce unemployed and consumer spending
at record lows.
However a potential rival bidder, U.S.-based Liberty Global
controlled by billionaire John Malone, has also
expressed an interest.
Liberty went head to head with Vodafone over the purchase of
Germany's Kabel Deutschland last year, eventually
pushing up the price that the British group had to pay.
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 to convince Ono's owners
to drop their plans for a stock market sale.
Vodafone, the world's second-largest mobile operator by
subscribers, has made a second bid for Ono as part of its
strategy to improve its networks following the $130 billion sale
of its U.S. arm this month.
Chief Executive Vittorio Colao said on Monday the group
could have the capacity to spend $30 billion to $40 billion on
acquisitions in coming years and no deal should be too big if it
makes strategic sense.
Although he declined to comment specifically on Ono, he said
that his company is interested in Spain.
Two sources familiar with the matter said the board meeting
was taking place in Madrid and could run late into the evening.
Vodafone's offer was not on the original schedule but the
sources said it would be discussed.
Investment funds Providence Equity Partners, Thomas H. Lee
Partners, CCMP Capital Advisors, and Quadrangle Capital own a
controlling 54 percent of Ono, according to the company's
Ono has 13 board members, but the funds that control the 54
percent stake only hold five seats so they would have to
convince at least another two board members to back a deal.
Other shareholders include General Electric Structured
Finance, Canada's institutional fund La Caisse de depot
et placement du Quebec and Spanish investment vehicles Val
Telecomunicaciones and Multitel.
Several of them have suggested they would be ready to sell