Vodafone TV base dips as speculation mounts on MásMóvil bid for Spanish unit

Vodafone has turned in a respectable fiscal Q3 trading update driven by growth in the enterprise sector and in Africa amid reports that Spanish telco MásMóvil is in talks to acquire the telecom giant’s Spanish operation.

According to El Confidencial, talks between the pair are now at an intermediate stage, with negotiations focusing on the price the buyers are willing to pay.

Citing sources close to MásMóvil’s private-equity owners KKR, Cinven and Providence, El Confidencial said that the latter say all options are on the table, with Vodafone CEO Nick Read being approached to find out how willing he is to contemplate a sale of the operation.

The latest speculation about consolidation in the Spanish market comes after the entry of activist investor Cevian into Vodafone’s ownership. Cevian is believed to be likely to press Vodafone to deliver on consolidation and focus on markets in which its operations are profitable.

Speaking to analysts after Vodafone’s update, CEO Nick Read said the company was actively looking at M&A and accepted there was a case for consolidation in the Spanish market generally.

Service revenue in Spain dropped in the quarter, driven by intense price competition, but Vodafone saw strong demand for its business products in the market.

The company’s Spanish mobile base fell by 53,000 year-on-year, even as churn showed signs of improvement. The broadband base also fell by 50,000 and Vodafone España saw its TV base decline by 44,000 as price competition continued to bite, despite a renewal of the company’s deal with HBO Max.

In Germany, Vodafone also saw its TV base decline by 75,000 as sales were hit by the COVID pandemic and the end of a promotional period.

German service revenue rose slightly on the back of ARPU growth, and the company added 19,000 cable customers in Q3, offset by 22,000 DSL broadband losses.

In Italy Vodafone also saw its TV base decline in the quarter, despite growth in overall broadband subs, while in Portugal the company’s TV base grew.

Overall, Vodafone had 18.449 million European TV customers at the end of the quarter, excluding the VodafoneZiggo JV with Liberty Global in the Netherlands.

The company’s German TV base stood at 13.305 million, while that in Spain stood at 1.521 million.

Analysts at Jefferies noted that Vodafone’s service revenue growth was ahead of consensus, “mostly attributable to Spain, Turkey and Egypt” and that “stronger mobile performance” in Germany “contrasts with further weakening of fixed broadband uptake”.

The analysts said that the telco faces “headwinds from tougher competition” in its largest market, with a new telecom law also forcing it to confirm customer contracts by phone or email rather than rolling them over.

In Spain, Jefferies said that “good business demand for IoT, cloud and security” had helped to “stabilise trends as price competition in the value segment continues”.

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