The company that can get hold of the fourth operating cellular license in Spain will be well placed to create yet another quad play, the fourth in Spain, which could either disrupt the market, or more likely lead to a large payday for everyone when one of the three global players who dominant Spain, finally snap it up.
And this week bidding began for the Teliasonera owned Yoigo, itself disadvantaged by not being part of one of the three quad play firms operating in Spain – Telefonica, Orange and Vodafone.
Tiny cable operator Telecable has thrown its hat in the ring, owned since July by UK based investment outfit Zegona Communications, suggesting it has €380 million to bid with, and letting the local media know all about it. But the deal is anything but straightforward – there is already a clustering of cable firms made up of Euskatel and R Cable (Mundo R), which were themselves dead set on buying Telecable, and wrapping up almost 400,000 cable homes in the country not owned by Vodafone’s Ono. Telecable claims to have 145,000 residential customers, more if you count enterprises.
No bid has been tabled by Euskatel, but the three largest cable operators after Ono, always needed to merge to gather momentum, and yet they also need a cellular operation. Right now Yoigo brings with it 3.3 million cellphone customers, to add to the unquantified number of MVNO customers which Telecable already has through a deal that was originally on the Vodafone network, but which has since shifted to Telefonica and has since been approached by Yoigo to use its 4G network.
Telecable mostly holds assets in the Asturias islands to the South West of Spain and probably serves a population of no more than 800,000, while Euskatel operates in the Basque regions of Spain in the North reaching 2.2 million inhabitants, and R Cable in the North West, reaching 2.7 million people. So there is the potential if they all merged, for this to become a national cellular network, with fixed lines in regional strongholds, quite a complex, but capable, quad play.
In the end such an entity would become a tasty morsel for the owner of the remainder of cable in Spain, Vodafone, although Orange and Telefonica may also become interested if that cluster of companies ever gets together and ever comes on the market.
Telecable in bidding for Yoigo is thought to be up against other private equity players such as Warburg Pincus, another MVNO in Másmóvil and some rich individuals. But whoever ends up owning Yoigo it will do better with fixed assets in the ground, so they are likely to knock on the door of these smaller cable operators anyway.
TeliaSonera has had Yoigo on the market for a while, and holds 77%, with local interests holding the remaining 23%. It rejected a €1 billion offer from Orange a year ago, although that would have had regulatory issues, and the price is coming down as growth slides in a Quad play market.
One of the jewels in both the Vodafone and the Telecable respective crowns is the fact that they both runs networks of WiFi Homespots, in Vodafone’s case through a partnership with FON, which should have reached 2 million hotspots by now, and for Telecable, its own 100,000 strong Wifisfera public WiFi hotspots, which offers WiFi to its MVNO customers.
Zegona, the Telecable owner, was set up by a former Virgin Media finance director Eamonn O’Hare, and it spent €640 million buying Telecable back in July. Our feeling is that Spain is heading, as many European markets, to the point where there are only three major Quad play operators, and where wholesale opportunities will have to be regulated for MVNO, OTT video and broadband in order to stimulate competition.