What happened?
*Over the weekend, Bloomberg reported that Telefonica and MasOrange (50:50 JV between Orange Group and private equity) had held ''informal talks'' about acquiring Vodafone Spain (now owned by Zegona)
*The article suggests that one option could be the breakup of the fixed and mobile businesses, and brands (with the Lowi sub brand going to MasOrange) to encourage regulatory approval. It is suggested that this could be a similar model to Brazil consolidation in 2020 (when Oi was split between the 3x remaining operators)
*There is no comment in the article about valuation, aside from noting Zegona''s original acquisition price of EUR 5 bn, and the article notes that there are not yet any ''formal deliberations''
*Subsequently this morning, Spanish newspaper Expansion is reporting that TEF has mandated Spanish investment advisors AZ Capital to study the transaction
BNPP Exane View:
*We have seen an increasing number of media reports related to Telefonica MandA in recent weeks and months, ranging from Spanish consolidation to the potential acquisition of VMO2, outstanding minority stakes in FiberCo businesses, and technology businesses. Our overriding view is that all options are on the table in this early stage of the strategic review (due to conclude in 2H25), and the company is likely taking pitches on a wide range of deals.
*Having said this, we see Spanish consolidation as one of the less likely options for a number of reasons:
1) Regulation: This would be the first time (in recent history at least) that an incumbent telco operator has been allowed to buy a challenger. TEF currently has 32%/26% broadband/mobile market share vs. Vodafone Spain at 14%/19% - hence any combination is likely to require regulatory approval. The example of Oi Brazil above is misleading - in that case Oi was the incumbent and working through bankruptcy proceedings, and even then the process took years to complete.
2) Asset split: Given the highly convergent...
