Orange Said to Eye Spain Takeover With Jazztel Among Targets

Orange SA (ORA) has intensified its search for acquisition targets in Spain to avoid being left out of potential consolidation in the country’s telecommunications market, according to people familiar with the matter.

France’s biggest carrier is discussing its options with investment banks, with possible targets including Jazztel Plc (JAZ) and TeliaSonera AB (TLSN)’s Yoigo unit, said the people, who asked not to be identified because the deliberations are private. A decision hasn’t been made and Orange may opt against an acquisition if it deems the price too high, they said.

In particular, Orange is eyeing Jazztel for its 1.4 million broadband customers, even though the fixed-line carrier is a relatively expensive target, said the people.

Jazztel shares rose 2.4 percent to close at 9.88 euros, and jumped as much as 4.7 percent yesterday after Bloomberg News reported Orange’s plans. The stock has gained 27 percent in 2014, valuing Jazztel at 2.5 billion euros ($3.4 billion).

“This could well be the year when we see some real consolidation taking place in the Spanish telecommunications industry,” said Stephane Beyazian, a London-based analyst at Raymond James Euro Equities. “Jazztel is getting quite expensive but it could still make sense for Orange to buy it.”

Photographer: Balint Porneczi/Bloomberg

Shoppers browse products inside the Orange SA store in Toulouse, France. Close

Shoppers browse products inside the Orange SA store in Toulouse, France.

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Photographer: Balint Porneczi/Bloomberg

Shoppers browse products inside the Orange SA store in Toulouse, France.

Cable IPO

A move by Orange, Spain’s third-largest wireless carrier -- behind Telefonica SA (TEF) and Vodafone Group Plc (VOD) -- would underscore rising demand for landline assets that are needed to offer combined broadband, TV and wireless packages.

Olivier Emberger, a spokesman for Orange; Beatriz Valverde, a spokeswoman for Jazztel; and Masha Lloyd, a spokeswoman for Yoigo, declined to comment.

Cable provider Grupo Corporativo ONO SA said this month it’s moving ahead with a plan to pursue an initial public offering even after Vodafone approached the Spanish company about a potential takeover. Its IPO may raise about 1 billion euros, and could be followed by its own acquisitions of smaller local cable operators, two people familiar with the matter said.

ONO is one of the few large cable assets that remain available in Europe after Vodafone acquired Kabel Deutschland Holding AG and Liberty Global bought Virgin Media Inc. last year.

TeliaSonera, Sweden’s biggest phone operator, halted a sale of Yoigo in April after failing to attract high enough offers from bidders including Paris-based Orange.

Barcelona Congress

On a Jan. 30 conference call, CEO Johan Dennelind said TeliaSonera is building a stronger position in Spain. It could make its own bid for Jazztel or ONO to build its Spanish operations, analysts at Berenberg Bank said today.

Top telecommunications managers including Orange Chief Executive Officer Stephane Richard, AT&T Inc. CEO Randall Stephenson and Vodafone CEO Vittorio Colao will rub shoulders in Barcelona next week at the Mobile World Congress, a traditional venue for showcasing the latest products and for dealmaking.

Jazztel’s stock has jumped sixfold since 2009 in Madrid trading. With legal headquarters in London and main operating offices in the Spanish capital, it has added customers by offering low-cost broadband and phone service and eventually wireless plans -- leasing network capacity from Orange.

Challenger Iliad

The company, which will report fourth-quarter earnings Feb. 26, probably increased its revenue last year by 14 percent to 1 billion euros, according to analysts’ estimates compiled by Bloomberg. Earnings before interest, taxes, depreciation and amortization probably climbed about 5 percent to 182 million euros, the estimates show.

Orange, meanwhile is seeking growth abroad as it struggles to stem a decline in wireless prices in France after rival Iliad SA introduced discounted packages in 2012. CEO Richard told Expansion newspaper this month that the Spanish phone market is too fragmented and that Orange is a candidate to take part in consolidation.

With net debt of 29.6 billion euros as of June 30 and a negative outlook from Standard & Poor’s and Fitch Ratings, Orange has refrained from major acquisitions since a $2 billion buyout of its Egyptian unit in 2012.

Orange climbed 0.4 percent to 9.34 euros in Paris, for a market value of 24.7 billion euros.

As of October, Orange had 22.9 percent of Spain’s wireless customers, behind 24.8 percent for Vodafone and Telefonica’s 33.6 percent, according to the most recently available statistics from the CNMC regulator. Yoigo had 6.5 percent market share.

To contact the reporters on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net; Marie Mawad in Paris at mmawad1@bloomberg.net; Matthew Campbell in London at mcampbell39@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Aaron Kirchfeld at akirchfeld@bloomberg.net

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