Monday, 18 December 2017

Masmovil mulls more M&A

By Mary Lennighan, Total Telecom
Tuesday 31 October 17

Spain's fourth operator outlines growth plans, including investment in FTTH infrastructure in areas overlooked by the big three

Masmovil has not ruled out the possibility of further acquisitions as it establishes itself as Spain's fourth operator. "We haven't stopped thinking of new possibilities," said Masmovil's chief strategy officer Pablo Freire at Total Telecom Congress on Tuesday, in response to a direct question about the likelihood of future acquisitions. "…

Masmovil has not ruled out the possibility of further acquisitions as it establishes itself as Spain's fourth operator.

"We haven't stopped thinking of new possibilities," said Masmovil's chief strategy officer Pablo Freire at Total Telecom Congress on Tuesday, in response to a direct question about the likelihood of future acquisitions.

"[That includes] M&A opportunities, everything," he said.

Masmovil's business has changed almost beyond recognition in the past two years, its growth mirroring the evolution of the Spanish telecoms market, Freire explained.

"The Spanish market has been an awful place to [be] in the past nine years," with declining revenues and "a lot of pressure on margins" as a result of the fixed-mobile convergence trend, he said.

But a series of high-profile mergers and acquisitions in 2014 mean "a terrible place to be became the most attractive telecom market in Europe," he said. "Revenues are growing again…[and] prices are going up."

In 2015 Masmovil was effectively an MVNO with half a million customers, a limited fixed presence and €160 million in revenues, driving EBITDA of €11 million. A year later its top line had grown to €1.1 billion and earnings to €119 million, "and we're going to reach €200 million [EBITDA] by the end of this year," Freire said. The telco's mobile base stood at 4.6 million in mid-2017 and its fixed-line customers had increased to 280,000 from around 25,000.

The growth was underpinned by acquisitions. In 2015 Masmovil picked up the remedy package resulting from Orange's purchase of Jazztel, which included fibre network assets; bought MVNO Pepephone in 2016; and most importantly, acquired Yoigo from Telia for €612 million just over a year ago.

Masmovil's strategy is centred on the retention of its various brands – it also owns an MVNO focused on the immigrant community, Friere said – and on building out its own infrastructure in order to reduce costs.

Spain's big three – Telefonica, Orange and Vodafone – are all targeting big urban centres for fibre-to-the-home (FTTH) rollout, which "leaves a huge space for us," Friere said. "We are deploying our networks where the other guys aren't."

Masmovil is rolling out FTTH in cities with population of fewer than 50,000, he said. Its mobile network comprises 4,700 sites and covers 85% of Spain's population, but it is not profitable to increase that any further, he added, therefore the telco has roaming deals in place with Telefonica and Orange.

There is more FTTH deployment on the cards though, although Friere admitted that "we need to raise more money to invest more."

As for more M&A, market watchers will just have to wait and see.

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