French multinational telecommunications company Orange has made a €3.4 billion (US $4.4 billion) cash offer to acquire Spanish broadband provider Jazztel, valuing it at €13 (US $16.83) per share, which Orange said was 22 percent more than Jazztel’s closing price on the Madrid exchange on 12 September and 34 percent more than its average price over the past 30 days. The deal is subject to regulatory approval, and also to Jazztel’s shareholders tendering at least 50 percent of the stock, on top of an almost 15 percent stake held by executives—including chairman Leopoldo Fernandez Pujals—who have agreed to sell.
Tarifica’s Take
This acquisition move, which had been rumored since February, would be Orange’s biggest such attempt in nearly a decade and would allow the operator to provide converged fixed and mobile services in Spain. It would thereby place Orange, currently the third-largest MNO in Spain, in a significantly improved position relative to its chief rivals, Telefónica and Vodafone. (The latter company acquired a broadband provider of its own, Ono, in July.) If the deal goes through, Jazztel would bring with it 1.5 million broadband subscribers, causing the resulting entity to be the second-largest broadband provider in Spain. Orange clearly hopes that the acquisition will boost it to the number-two spot among Spanish MNOs, as well. It projects that a takeover of Jazztel would generate revenue and savings amounting to €1.3 billion (US $1.68 billion).
“Orange and Jazztel together, that’s the combination of two success stories in Spain,” said Orange CEO Stéphane Richard. “With the economy recovering, it’s the right time to reinforce our presence.” There is a pre-existing synergy between the two companies—Jazztel also offers MVNO services which run on Orange’s network, and it would bring a further 1.5 million mobile customers with it. Fixed-mobile convergence is an active trend in Europe, as well as in other developed markets where competition is intense, and Orange is clearly embracing it in its search for a competitive edge.
Other Notable Developments
SMS Revenues to Stay Ahead of OTT Revenues Until 2018
A recent study predicts that global revenues from SMS will not be surpassed by those from OTT messaging apps until 2018, and that SMS will remain a US $100 billion business for at least the next three years. If these projections are accurate, OTT’s ascendancy over SMS will be more gradual than many observers expected, and SMS will remain a significant presence in the messaging marketplace. While OTT players offer major advantages to many customers, there appears to be room for both technologies in the foreseeable future.