British multinational telecom giant Vodafone has agreed to buy Spanish cable company Ono for the equivalent of €7.2 billion (US $10 billion) in cash and debt. The transaction, subject to anti-trust clearance, is expected to be completed in the third quarter of 2014. Ono provides fixed broadband services to about 1.5 million customers and mobile services to about 1 million. The deal will also give Vodafone access to the approximately 7.2 million homes that can receive Ono’s fiber-optic services. The price of the transaction represents 10.4 times Ono’s EBITDA for the year 2013.

Tarifica’s Take

This deal, coming in the wake of Vodafone’s agreement last year to acquire Kabel Deutschland for €7.7 billion (US $10.7 billion), shows clearly that the British company is pursuing a strategy of increasing its competitive strength in cable and that it sees integrated fixed-mobile services as important to the future of the telecom industry. On this point, Vodafone CEO Vittorio Colao said in a statement, “Demand for unified communication 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.”

A dimmer view of the deal was offered by Spain’s Consumers and Users Organization (OCU), which stated that it reduces options for mobile consumers because Ono was one of Vodafone Spain’s strongest competitors in the mobile market. As for fixed broadband services, Vodafone stated that it will continue to pursue its FTTH initiative, but the OCU predicted that due to the acquisition, “the deployment of fiber in Spain will slow down.” Whatever the outcomes in terms of competition and benefits to consumers, Vodafone’s purchase of Ono constitutes a transformative event in the Spanish market and also positions Vodafone as a leader in the larger European shift toward operators offering more bundled services—fixed, mobile, broadband and TV.