• Orange has been seeking fixed line broadband assets in Europe
• Its strategy is increasingly focused on the delivery of converged services 
• Belgium was one of the markets where it didn’t have its own fixed network assets
• Now it is in exclusive talks to acquire a majority stake in cable operator Voo for €1.35 billion
• But it could still face a challenge from Telenet

Orange looks to have landed its favoured fixed broadband asset catch in Belgium with the announcement that it’s in exclusive talks to acquire a majority stake in Voo, the cable operator that operates a network in the Walloon region of the country as well as parts of the capital Brussels. 

But it’s not a done deal, as Orange has a determined rival suitor.

News of the M&A agreement is not unexpected: Orange Deputy CEO Mari-Noëlle Jégo-Laveissière stated during a recent media briefing in London that the operator was seeking to acquire fixed line assets that could be married to existing mobile assets as part of its efforts to be a “convergent operator” in as many markets as possible. Belgium looked like an obvious market for such a move, and Voo looked to be a very likely target. (See Convergence strategy to drive more Euro M&A at Orange: Deputy CEO.)

But as noted in our reporting last month, Orange wasn’t the only company interested in Voo’s assets, as Belgian operator Telenet (part of the Liberty Global portfolio) was also keen to add Voo to its existing business, while a number of private equity firms had also been cited as potential bidders.

Indeed, Orange noted in its announcement on Tuesday morning that it had been selected to “enter into exclusive negotiations” to acquire 75% of the capital minus one share of VOO from current owner Nethys “following a competitive selection process.”

Utility firm Nethys has valued Voo at €1.8 billion, which means Orange will shell out €1.35 billion for its stake if the acquisition is completed successfully. 

But Telenet might still have something to say in the matter and it’s clearly miffed at not being selected. It issued a statement late Monday noting it had been passed over, and that it is assessing the decision and will “consider its further options.”

To hammer home its point, Telente even pointed out what a great fit it is for Voo: 

“Telenet’s interest in acquiring VOO comprised a futureproof industrial telco project in Wallonia and throughout Brussels. Telenet regrets today’s decision as an acquisition by Telenet would have brought benefits to the overall competitive landscape in Belgium, the Walloon and Brussels regions and for VOO as a company.”

Ouch!

For Orange, it puts it a step closer to being able to marry up its current mobile service offerings with fixed broadband services running over its own infrastructure (rather than using wholesale services): It has already dipped its toe into the Belgian FTTP market with some fibre network pilot rollouts in Brussels. 

“After 25 years of Orange's presence in Belgium, the acquisition of VOO will enable Orange Belgium to operate a very high-speed network in Wallonia and part of Brussels, thereby reinforcing the deployment of its convergent strategy at a national level,” the operator noted. “The ambitious investment plan and the combination of both companies’ competences will make it possible to ensure and strengthen the quality of VOO's network in the long term, serving customers and the competitiveness of the Walloon and Brussels regions,’ it added.

If completed, the operator will boost its position as the country’s second largest CSP behind national operator Proximus. Orange Belgium currently has 2.7 million mobile contract customers and 382,000 cable customers and generated €346.3 million in sales during the third quarter of this year, up by 3.3% year-on-year. Voo has more than 450,000 cable broadband customers for about 10% of Belgium’s fixed broadband market.

Nethys will be hoping the deal completes: It had previously agreed the sale of Voo to Providence Equity, but that agreement was scrapped last year after Orange took legal action, citing transparency concerns, and the deal was nullified by the courts. Telenet, of course, might step in and try to thwart this latest decision...

Orange Belgium will increase its debt to finance the acquisition, with help from its parent, which tried unsuccessfully to take full control of the Belgian operation earlier this year with a €22.00-per-share offer to minority stakeholders: The price was deemed too low by some shareholders, including private investment firm Polygon Global Partners, so Orange still only holds about 77% of the Belgian operator’s stock.

- Ray Le Maistre, Editorial Director, TelecomTV