Spanish regional cable operator Euskaltel and Zegona Communications, the UK-based owner of neighbouring cable operator Telecable, have confirmed that they are in talks that could see the Euskaltel take control of Telecable.
Euskaltel, which operates in the Basque Country and also owns R, the regional network for Galicia, has informed Spanish regulator the CNMC that it has initiated talks with Zegona for the “direct or indirect” acquisition of Asturias network Telecable. Euskaltel said that no definitive deal had been struck to date and it was not certain that a deal would be struck.
Zegona also confirmed that it is in talks with Euskaltel and that a further announcement will be made in due course.
According to Spanish financial daily Expansión, a deal could value Telecable at €750 million – a sum that would give Zegona, which purchased Telecable for €640 million, a strong net gain thanks to the sharp fall in the value of the pound following the Brexit vote.
Euskaltel is expected to finance the acquisition of Telecable through a mix of cash and shares so as not to raise further its debt, already high thanks to its 2015 purchase of R.
Possible stumbling blocks include the size of stake and role of Zegona in the governance of the combined entity.
Euskaltel’s leading shareholder Kutxabank, with a 25.85% stake, currently wields the power of veto over strategic decisions, and certain decisions – such as any move to transfer the HQ of the company out of the Basque Country – require a 75% majority.
A deal would also allow the group to expand to other territories such as Cantabria, Navarra, La Rioja and Léon. Expansión has previously reported that both groups had been in talks to roll out a network in Cantabria in partnership with local player Ibiocom, backed by the regional government.
Both Euskaltel and Zegona face the problem that room for growth is currently limited by the small geographic markets they serve. Zegona has previously tried to establish a national presence in Spain through the acquisition of mobile player Yoigo, but lost out in a battle to strike a deal with the latter’s owner Telia to another Spanish mobile player, MásMóvil.
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18th November 2019