Vodafone, Orange Gear Up for Deals in Ailing Spanish Market
(Bloomberg) -- Vodafone Group Plc and Orange SA are both eyeing potential deals in Spain as a way of reining in competition in one of Europe’s most cut-throat markets for telecommunications services.
“We are actively thinking about the Spanish market and its structure,” Orange Chief Financial Officer Ramon Fernandez said Wednesday at the Morgan Stanley TMT conference. “If there is a good M&A option involving us directly, we will consider it of course.”
Vodafone outlined similar ambitions in a trading statement Tuesday when it said it’s pursuing opportunities for “in-market consolidation” in Spain.
According to Vodafone, the number of brands in the country now stands at about 80 from about 60 in 2017. That plethora of operators explains why many struggle to record significant returns on capital in a crowded market that forces carriers to compete on price to carve out market share.
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Earlier this month, Angel Vila, chief operating officer of Spanish market leader Telefonica SA, said that most of the large carriers in the country are operating with “low or insufficient” returns of capital employed, a key financial metric. That’s not sustainable in the long-term and could lead to further consolidation, he said, adding it would be a trend that Telefonica would welcome.
Orange is Spain’s second largest operator, followed by Vodafone in third place. The fourth is Masmovil Ibercom SA, which was delisted last year after a leveraged buyout by three private equity funds.
Larger carriers have all been facing increasing pricing pressure from Romanian carrier Digi Communications NV, which is rolling out its on fiber-optic broadband network in Spain and competing aggressively in the low-end of the market.
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