By Paul Sandle and Julien Toyer
LONDON/MADRID Jan 28 Vodafone and
Liberty Global are competing to buy Spain's largest
cable operator, Ono, from its private equity owners, two people
familiar with the situation said on Tuesday.
Ono had been planning an initial public offering this year
in a bid to capitalise on a wave of investor interest in the
increasingly successful cable sector, sources told Reuters
Liberty Global, owned by billionaire John Malone, has been
on a spending spree to increase the size of its empire in
Europe, where it derives more than 90 percent of its revenue.
It bought Britain's Virgin Media for $15.8 billion last
year, and just on Monday agreed to pay 10 billion euros ($13.7
billion) for Dutch cable operator Ziggo after months
Spain is one of the few European countries, along with
France, where Liberty is not already present. Vodafone, for its
part, has been acquiring broadband assets to allow it to offer
bundled services to consumers and offload traffic from its
The two companies fought to buy Germany's Kabel Deutschland
last year, with Liberty forcing Vodafone to raise its
offer to 7.7 billion euros.
Liberty's deal to buy Ziggo was struck at an enterprise
value to 2013 core profit (EBITDA) multiple of 11.3 times,
compared with a median of 9.4 times for its peers, according to
Reuters data. Liberty paid about 8 times forward EBITDA for
Investment funds Providence Equity Partners, Thomas H. Lee
Partners, CCMP Capital Advisors, and Quadrangle Capital own 54
percent of Ono, according to the company's website.
The funds are holding ongoing talks with Vodafone and
Liberty, one person familiar with the situation said.
Ono had core earnings of 752 million euros for 2012, which
at the median multiple of 9.4 times would give an enterprise
value of 7.1 billion euros.
One banking source, however, said Vodafone or Liberty would
have to come in with a bid at a multiple of 10-12 times if it
wanted to win over the IPO plan.
Analysts believe a price war is the main reason behind the
upcoming market consolidation in Spain, with smaller players
Ono, Jazztel and Yoigo, owned by Teliasonera
in the spotlight.
The Spanish telecoms market has become increasingly
competitive in recent years, with Telefonica last year launching
a 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.
The move forced other operators, such as Vodafone, to slash
prices and overhaul its offer in Spain. The British company has
already struck a deal with Orange to offer broadband
services in major cities.
A Spanish banker active in the telecom sector said it would
make sense for Vodafone to buy Ono. However, it would create a
big headache for Jazztel, which has also launched quad play
services. Its shares have risen about 70 percent over the last
12 months, making it comparatively more expensive than Ono.
"If the deal ends up being done, Jazztel will lose its ideal
lover," he said. "The only other candidate (to buy out Jazztel)
would be Orange, but it's not ideal."
Ono, Vodafone, and Liberty declined to comment.