For Vodafone, FTTH is not enough, as it buys Spanish cable operator Ono for €7.2bn

Vodafone confirmed this morning that it has agreed to purchase Spanish fixed broadband and pay-TV operator Ono for €7.2bn. The deal is part of Vodafone’s European unified communications strategy, and the telco says it is complementary to Vodafone Spain’s ongoing FTTH programme. Ono’s network reached 7.2 million homes and serves 1.9 million customers in 13 of Spain’s 17 regions.

Back in March 2013, Vodafone signed an agreement with rival telco Orange to co-invest in FTTH in Spain, with the intention of reaching 6m households and offices by 2017 (800,000 by March 2014). The fibre will be owned independently but to the same technical standard, and each partner will have guaranteed access to the whole infrastructure.

Ono has invested €7bn in its fibre network since 1998, although unlike Vodafone Spain’s FTTH network it is cable-based. Ono says the network has been fully upgraded to DOCSIS 3.0, and has been designed to support 500 homes per node. The network passes 41 per cent of total homes in Spain, with broadband speeds of 200Mbit/s and pay-TV through TiVo.

Vodafone Spain’s FTTH programme will now be refocused towards areas where Ono has limited or no network presence, and it intends to complete its FTTH rollout to pass 1.5 million homes – somewhat lower than the original target of 6 million, but instead it intends to increase Ono’s NGN network to reach “up to 10 million homes”.

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

Vodafone says it expects to achieve cost and capex synergies with a run-rate of approximately €240m before integration costs by the fourth full year after completion of the deal. The savings will be primarily derived from utilising Ono’s network for mobile backhaul, the migration of Ono’s mobile traffic to Vodafone’s network, as well as limiting Vodafone’s FTTH build plan to just 1.5 million homes passed.

“This transaction reflects Ono’s attractive position as Spain’s leading provider of high speed broadband, premium pay-TV and fixed communications,” said José María Castellano Ríos, chairman of Ono. “As part of Vodafone, Ono will continue to seize new growth opportunities and deliver the quality that our customers expect.”

As at 31 December 2013, Ono had approximately 2,500 employees. It reported revenues of €1.5bn for the year to December 2013, and whilst it had an operating profit of €269m it reported a loss before tax of €41m. Vodafone will finance the purchase from its existing cash resources and undrawn bank facilities. It expects the deal to close in Q3 this year.