MasMovil looking again at Vodafone merger

Spanish alternative telco MasMovil is looking at options to expand that include a merger with Vodafone, according to local reports.

According to El Confidencial citing unnamed sources, the number four Spanish operator has turned to Goldman Sachs to analyse options for acquisitions, with Vodafone firmly in its sites.

The report says that conversations between the two companies, which have been ongoing for several months, have intensified in recent weeks, but without so far reaching an agreement.

The sources cited indicate that a combination of the pair,which has long been the subject of speculation, could be on the cards within 12 months.

Separate sources have told El Confidencial that Vodafone would want to control a majority stake of 60% in a combination of the pair, while Madrid-based MasMovil, controlled sinece last June by Cinven, KKR and Providence Equity, is seeking a 50:50 ownership split.

Vodafone’s case rests on the rebound in its commercial fortunes compared with a year and a half ago, when it had suffered the loss of numerous customers after dropping out of the premium sports business.

Any combination of the pair would attract the attention of the Spanish competition authorities as MasMovil has 35% share of mobile lines in the country and Vodafone has a 25% share of the fixed market.

Investment analysts at Jefferies, which had earlier contended that an acquisition of Vodafone by a delisted MasMovil was more likely than an acquisition of MasMovil by Vodafone, last September maintained that a purchase by MasMovil was the more likely outcome but that a 50:50 JV would avoid the necessity of establishing a control premium agreeable to both sides.

Such a move, said Jefferies, would enable Vodafone to reduce debt on its balance sheet by deconsolidating the Spanish operation on the model of VodafoneZiggo in the Netherlands, where “high off-balance sheet leverage has been broadly accepted by shareholders following the merger with Ziggo”.

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