MÁSMÓVIL, Spain’s fourth largest wireless carrier and fixed broadband provider, today announced a tender offer to acquire 100% of Euskaltel, Spain’s fifth largest wireless carrier and fixed broadband provider, for €11.17 per share in cash, valuing Euskaltel’s equity at €2.0bn. The offer from MÁSMÓVIL represents a 27% premium to Euskaltel’s weighted average share price, over the past 6 months.

Overall, the deal values Euskaltel at an Enterprise Value of €3.5bn, which includes its €1.5bn of net debt. Indeed, this valuation implies multiples of 10.1x EBITDA and 21x Operating Cash Flow (i.e., EBITDA less capital expenditures).

MÁSMÓVIL’s offer for Euskaltel has been accepted by Euskaltel’s three largest shareholders, which, in aggregate, comprise 52% of its share capital. Specifically, Zegona Communications (21.4%), Kutxabank (19.9%), and Corporación Financiera Alba – Grupo March (11.0%), have entered into irrevocable undertakings to tender all of their shares. Importantly, MÁSMÓVIL’s offer is conditional on achieving the acceptance, over a threshold of 75%, of Euskaltel’s shareholders.

Finally, MÁSMÓVIL has financed the Euskaltel takeover with a debt facility from banks including BNP Paribas, Banco Santander, Barclays, Deutsche Bank, and Goldman Sachs.

Euskaltel – Overview

Euskaltel is a regional wireless carrier and fixed broadband provider in northern Spain. The company operates under the brands Euskaltel in the Basque Country, R in Galicia, and Telecable in Asturias.

Euskaltel Network Map by Brand MÁSMÓVIL

Additionally, through its new Virgin telco brand, Euskaltel recently began its national expansion strategy across Spain, on a wholesale basis.

Euskaltel Subscribers by Product Offering

Currently, Euskaltel is the fifth largest wireless carrier in Spain, behind MÁSMÓVIL, with 1.2 million subscribers (2% market share). Additionally, Euskaltel is presently the fifth largest provider of fixed broadband services in Spain, with 651k subscribers (4% market share).

Fixed Broadband Infrastructure

Euskaltel’s broadband offering is primarily backed by hybrid fiber-coaxial (HFC) technology, with the company owning minimal fiber infrastructure.

Euskaltel Homes Passed HFC FTTH Wholesale Fiber

Specifically, Euskaltel passes a total of 2.5 million homes with its hybrid fiber-coaxial (HFC) and fiber-to-the-home (FTTH) network. However, of these 2.5 million homes, the company only passes ~125k households with owned fiber-to-the-home (FTTH) infrastructure. Notably, the company claims to be able to reach an additional 20.9 million homes through wholesale agreements that it has in-place. Specifically, these agreements are with Orange, Telefónica, and Adamo (owned by EQT).

FiberCo – Strategic Initiative

Prior to the offer from MÁSMÓVIL, Euskaltel was in the process of setting up a FiberCo in Spain, to monetize its existing fiber assets and fund growth for the deployment of new fiber infrastructure. Regardless of whether the monetization initiative proceeds, in light of the MÁSMÓVIL offer, its shows that Euskaltel is focusing on upgrading its hybrid fiber-coaxial (HFC) network to fiber infrastructure.

Euskaltel FiberCo Structure

MÁSMÓVIL – Overview

MÁSMÓVIL is a portfolio company of global private equity firms Providence Equity, KKR, and Cinven, after it was taken private, in November 2020, for €5.3bn. Specifically, the ownership of MÁSMÓVIL is broken-down as follows:

  • Providence Equity: through its 8th private equity fund owns 37%
  • KKR: through its 5th European private equity fund owns 33%
  • Cinven: through its 7th private equity fund owns 30%

Key Operating Metrics

MÁSMÓVIL is the fourth largest wireless carrier in Spain, having 10.1 million mobile subscribers, with its main brand being Yoigo. Additionally, the company is the fourth largest fixed broadband provider with 2.1 million fixed broadband subscribers.

Transaction Rationale – MÁSMÓVIL Acquires Euskaltel

With the acquisition of Euskaltel, MÁSMÓVIL further consolidates its position as the fourth major telecommunications operator in Spain. However, it remains behind Telefónica, Orange, and Vodafone, in Spain, in terms of scale.

Overall, MÁSMÓVIL together with Euskaltel, will form a company with 14 million customers, revenue of €2.7bn, and 26 million homes passed with fiber. MÁSMÓVIL’s rationale for a combination with Euskaltel is two-fold: i) network synergies, and ii) enhanced scale for future investments.

Wholesale Network Synergies – Mobile and Fixed

Euskaltel is a mobile virtual network operator (MVNO), leveraging Orange and Telefónica’s network infrastructure in Spain. Therefore, MÁSMÓVIL will be able to accrue some savings by bringing a portion of Euskaltel’s network traffic on to its own digital infrastructure. However, it is worth noting that MÁSMÓVIL does not have nationwide coverage in Spain, using its own infrastructure. In turn, this limits some of the synergy potential for MÁSMÓVIL.

In terms of fixed network synergies, MÁSMÓVIL will be able to leverage Euskaltel’s primarily hybrid fiber-coaxial (HFC) assets in northern Spain to offload traffic. Therefore, the company will be able to save on wholesale access costs, which it pays to Orange and Telefónica.

5G and Fiber Infrastructure

Strategically, MÁSMÓVIL gains increased scale, by acquiring Euskaltel, to accelerate its 5G and fiber infrastructure investment plans in Spain. Specifically, two of the company’s largest areas of future capital expenditures are i) fiber roll-outs to pass additional homes and ii) 5G spectrum purchases.

To this end, Spain intends to hold auctions for both low-band and high-band 5G spectrum in 2021. Firstly, the 700 MHz band, which is a priority for the European Commission, will go to auction in Spain in mid-2021. Secondly, the 26 GHz spectrum auction is expected to occur in 2021 as well.

Transaction Advisors – MÁSMÓVIL and Euskaltel

MÁSMÓVIL’s legal advisors include Clifford Chance, Castañeda Abogados, and Evergreen Legal. Additionally, MÁSMÓVIL’s financial advisors were BNP Paribas, Goldman Sachs, and Barclays.

Euskaltel’s legal advisors are Uría Menéndez and its financial advisor is Citigroup.

Adam Simmons covers Towers for Dgtl Infra, including American Tower (NYSE: AMT), Crown Castle (NYSE: CCI), SBA Communications (NASDAQ: SBAC), Cellnex Telecom (BME: CLNX), Vantage Towers (ETR: VTWR), IHS Holding (NYSE: IHS), and many more. Within Towers, Adam focuses on the sub-sectors of ground-based cell towers, rooftop sites, broadcast / radio towers, and 5G. Adam has over 7 years of experience in research and writing for Towers.


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