Vodafone acquires Spanish operator Ono in $10B deal

After a lengthy – and public – courtship, wireless carrier Vodafone and Spanish cable operator Grupo Corporativo Ono have agreed to tie the knot. Reports say Vodafone will pay 7.2 billion-euros ($10 billion) in exchange for 1.9 million new customers in Spain and an expanded Internet and pay-TV footprint in Europe.

The deal gives Vodafone access to Spain’s largest next-gen network, one that reaches 7.2 million homes, more than 40% of the nation’s households. Ono has invested more than 7 billion euros in its network over the past decade, and has enough excess capacity to allow for considerable expansion, a major factor in the deal.

The deal for Ono is Vodafone’s second acquisition since selling its stake in Verizon Wireless for $130 billion last year. In Q4, Vodafone outbid John Malone’s Liberty Global for German service provider Kabel Deutschland.

The European market has seen a spate of consolidations in recent months. Some of that has been the result of pay-TV operators looking to reduce operating costs and to gain market share in an attempt to use size as leverage in content rights negotiations.

In the case of Vodafone, the ability to increase its pay-TV offerings are more directly tied to efforts to offset shrinking revenues from its mobile business, as well as a desire to make hay from the increased popularity  of UC products and services in the Spanish market.

“Demand for unified communications products and services has increased significantly over the last few years in Spain, and this transaction – together with our fiber-to-the-home build program – will accelerate our ability to offer best-in-class propositions in the Spanish market,” said Vodafone CEO Vittorio Colao.

Vodafone said the deal will help it save about 2 billion euros in operational costs and generate up to 1 billion euros in additional revenue.

For Ono, the deal far exceeds the value it would have seen if it had gone forward with a planned IPO.

“This transaction reflects Ono’s attractive position as Spain’s leading provider of high speed broadband, premium pay-TV and fixed communications,” said Ono board Chairman José María Castellano Ríos. “As part of Vodafone, Ono will continue to seize new growth opportunities and deliver the quality that our customers expect. The enlarged business is also expected to drive innovation in the Spanish telecommunications industry.”

The deal still needs regulator approval, which both companies said they expect to receive quickly.

Stay tuned.

Jim O’Neill is Editor of Videomind and Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn