Summary:

The deal is indicative both of Vodafone’s current wealth and of the European trend toward converging and consolidating fixed-line and mobile services.

Vodafone racecar

As was reported to be likely last week, the British telecoms group Vodafone is to buy the Spanish fixed-line operator Ono for €7.2 billion ($10 billion).

Vodafone recently sold its stake in Verizon Wireless to Verizon for $130 billion, so it is currently swimming in money. The group traditionally has a mobile focus, but mobile-fixed convergence and consolidation is the name of the game in Europe right now, and Vodafone is trying to pick up cable and high-speed broadband assets that it can combine with its mobile offerings to save itself money and create one-stop shops for communications and home entertainment customers.

In Germany, that has involved buying Kabel Deutschland (for $10.4 billion) in order to better square up to Deutsche Telekom, which also offers a mix of fixed and mobile access and pay TV. Now the same story is being played out in Spain, where the Ono buy will help Vodafone better take on the likes of Telefonica.

Vodafone chief Vittorio Colao said in a statement on Monday that the deal represented an “attractive value creation opportunity” for his company:

“Demand for unified communications products and services has increased significantly over the last few years in Spain, and this transaction — together with our fiber-to-the-home build program — will accelerate our ability to offer best-in-class propositions in the Spanish market.”

Ono, which was until now contemplating a stock market flotation, has Spain’s biggest next-generation fixed-line network, serving 1.9 million customers and passing 7.2 million homes, or 41 percent of the Spanish market. Vodafone already has its own fiber-to-the-home play in Spain – a coinvestment with Orange that aims to pass 1.5 million homes – that it said will be “refocused towards areas where Ono had limited or no network presence.”

Ono’s broadband services deliver speeds of over 200Mbps, and its pay TV product is based on TiVo. The provider owns the vast majority of the ducts in its network, so further network upgrades — which should be a way off, as its systems were recently revamped — promise to be fairly cheap.

What’s more, Vodafone — which is primarily a mobile player, don’t forget — said it intends to use Ono’s network to provide backhaul connectivity for its mobile base stations. This should save Vodafone a fortune in the coming years.

We can expect to see much more of this kind of convergence-consolidation activity in the near future. Another recent example saw Deutsche Telekom buy GTS Central Europe to provide a fixed-line complement to its mobile services in Poland and the Czech Republic.

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