Report: An IPO by Spain's Ono could fuel convergence ambitions

Spanish cable operator Ono is reportedly considering an initial public offering in 2014 in a move that could make it a potential target for mobile operators seeking fixed-line assets such as Vodafone and Orange, according to a Reuters report.

The report, citing unidentified sources, said Ono was encouraged by the recent strong demand for shares in France's Numericable, which last month raised €652.2 million ($900 million) from its IPO. A final decision has not yet been made, the report said.

It has previously been suggested that Vodafone could be interested in Ono, since Vodafone is pursuing a convergence strategy throughout Europe.

"A listing would put a price on the asset and make it a palatable target for the likes of Vodafone or Orange, whose margins have been seriously pressured by the ongoing war on prices," one of the sources told Reuters.

In order to gain the necessary fixed assets to allow it to offer bundles of fixed and mobile services, Vodafone has been buying up operators such as Kabel Deutschland in Germany and forming wholesale agreements or other arrangements elsewhere.

In Spain, however, Vodafone and Orange already said in March that they would invest up to €1 billion to jointly build a fibre network that would bring high-speed Internet service to 6 million households across 50 major cities by September 2017.

Telefónica has also crafted an agreement with Vodafone Spain and Orange Spain to share vertical fibre network infrastructure in buildings they serve throughout Spain.

Yet despite this network collaboration, speculation that Vodafone could still be interested in buying Ono refuses to die.

"Vodafone's urgent need to compete more with Telefónica's proactive quadruple-play offer means cable operator Ono and Jazztel could be potential targets," Deutsche Bank analysts wrote in a note released to clients on Tuesday, Reuters reported.

Convergence is a particular hot topic in Spain, where Telefónica's Movistar launched a "quad-play" offer under Fusion that bundles together TV, fixed voice and broadband services with a mobile plan and offers them at a discount. This encouraged rivals Orange Spain and Vodafone Spain to follow suit with similar multi-service plans, while fourth operator Yoigo, owned by TeliaSonera, also sells a multi-service bundle under the Fusion brand.

Reuters added that Orange has also been looking at ways to strengthen its Spanish business, according to sources.

Ono has declined to comment on the IPO rumours, although the company has previously proposed the possibility of going public. It would need to address a number of issues before doing so, including the fact that the company's debt is high compared to its peers, and profits have been falling.

For more:
- see this Reuters article

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