Vodafone, FT Orange mull bids for Spain's Yoigo

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Yoigo, Spain's fourth largest operator, is expecting to attract bids from Vodafone and France Telecom Orange when offered for sale by TeliaSonera.

The operator, which is 76.6 per cent owned by TeliaSonera, will place a sale sign on Yoigo within two weeks, according to three people close to the deal, with the hope that bidding could push the price for Yoigo up to around €1 billion, claims Reuters.

Vodafone's CEO, Vittorio Colao, told local newspaper La Informacion that he would look at the possibility of acquiring Yoigo if it was offered for sale. "This does not mean that we will, but we'll take into account the potential price and the opportunities it represents."

Jean Marc Vignolles, CEO of Orange Spain, made a similar commitment last month, claiming the French telecoms group would study the options presented by Yoigo.

The Spanish operator could prove attractive to both Vodafone and FT Orange (the 2nd and 3rd largest mobile operators in Spain, respectively) by providing them with better pricing power and the ability to extract operational savings.

However, bankers with a focus on the telecoms sector disagree over the possible value of Yoigo, with some claiming that the business is worth €600 million and others arguing for more than €1 billion once the value of tax credits and cost savings are factored in.

Of note, Yoigo has a roaming contract with Telefónica to carry its traffic in locations where it has no network coverage, which costs Yoigo around €100 million a year, a source told Reuters. Vodafone and FT Orange could potentially save this cost by carrying the Yoigo traffic over their own Spanish networks.

One banker close to the deal added that Yoigo remained "sub-scale" with little cash flow. "The process looks difficult because only Vodafone and France Telecom are likely to be there," the banker said. "It's very difficult to tell your board you're going to invest in Spain right now."

After launching six years ago, Yoigo has struggled to report a profit until last year and has only had positive free cash flow since the last quarter of 2011, states Reuters. The operator has roughly 5.6 per cent of the Spanish mobile market and 3.3 million customers.

For more:
- see this Reuters article
- see this La Informacion article (translated via Google Translate)

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