MásMóvil ready to bring in the brands as Euskaltel bid clears final regulatory hurdle

• Spanish securities regulator CNMV approves €2 billion takeover bid
• Deal to go through if 75% of Euskaltel shareholders agree
• Spain's fifth-largest telco will disappear from the market
• It's a minnow at present, but growing fast

Spain's securities regulatory has given the green light to MásMóvil's planned €2 billion(ish) takeover of Euskaltel, a deal that will create a stronger fourth player in the market and leave it with a sizeable portfolio of brands to manage.

MásMóvil launched an €11.17-per-share bid for all of Spain's fifth largest telecoms operator in March, which valued it at around the €2 billion mark, although it lowered its price to a round €11 last month after Euskeltel paid a €0.17-per-share dividend; should there be further dividend payments before the deal goes through it will likely drop the offer price again.

The Comisión Nacional del Mercado de Valores (CNMV) this week approved the voluntary takeover bid at the new price, following the authorisation of the government, which had to OK the foreign investment angle; as of last November, MásMóvil is owned by investment firms Cinven, KKR and Providence.

So now MásMóvil needs to get shareholders on board. It needs the agreement of 75% plus one share of Euskaltel's current holders for the deal to go ahead and has already secured 52.32% through the buy-in of its three major shareholders – Zegona, Kutxabank and Alba Europe. The remainder will have to make up their own minds. The price looks attractive, the original offer being the best part of 27% above Euskaltel's weighted average share price over the previous six months, but there are other factors at play, chief among which is probably Euskaltel's heritage as a Basque company.

MásMóvil is fully aware of what that means, and has committed to retaining Euskaltel's headquarters in Derio, just north of Bilbao, and its name for a period of five years, as well as making the right noises about keeping existing staff.

Euskaltel is much more than a Basque operator though. It operates as Euskaltel in the Basque Country, but also serves Galicia as R and Asturias as Telecable. Further, it set out its stall as a nationwide player in May last year when it launched a converged fixed broadband, mobile and TV product under the Virgin Telco brand.

That's four more brands joining the MásMóvil stable, which is already crammed with its variously-named acquisitions of recent years. In addition to its own name and high-profile Yoigo – the mobile service provider it picked up from Telia in 2016 – MásMóvil also operates Hits Mobile, Pepephone, Llamaya, Lebara, and Lycamobile, as well a handful of less well-known labels.

The global telecoms industry has many times seen major telcos stutter while trying to merge brands and cultures after takeover deals, but thus far MásMóvil seems to be coping.

Its full-year 2020 numbers showed 19% revenue growth to €1.74 billion and an EBITDA hike of 37% to €642 million, while overall customers stood at 11.5 million, up 28% on-year. Naturally, some of that growth was inorganic, but growth has continued since; at the end of Q2 MásMóvil said it had 11.8 million customers, split between its mobile business with 9.7 million and fixed broadband (2.1 million).

Euskaltel is small fry by comparison, particularly in the mobile space. Of its 847,000 mass market customers as of the end of Q1, 737,000 were landline accounts and just 110,000 mobile customers. Interestingly, its total includes 101,000 Virgin Telco customers – 80,000 landline and 21,000 mobile phone – all amassed in its first 10 months of operation.

But despite solid growth, Euskaltel will not have a huge impact on MásMóvil's market share, presuming the deal goes ahead. MásMóvil accounted for 17% of Spain's mobile market at the end of last year, while Vodafone, the smallest of the big three had 22%, slightly behind Orange's 23%. MásMóvil's position in fixed is weaker, its market share coming in at just shy of 8.5%.

Nonetheless, it has firmly established itself as the market's number four player, both through M&A and organic growth, and swallowing up the biggest of the also-rans allows it to remove a competitor at the lower end of the market. Buying up the fifth-largest operator could be a smart move, provided it can manage all those brands.

- Mary Lennighan, reporting for TelecomTV