French telecoms company Orange is buying Spanish fixed line operator Jazztel.
The purchase is intended to bolster its mobile operation in Spain to better compete with rivals Telefonica and Vodafone.
The deal has to get the backing of at least half of the shareholders .. on top of the14.5 percent of the shares that Jazztel’s chairman has already agreed to sell. It will also have to be approved by regulators.
The offer is for 100 percent of Jazztel shares at 13 euros per share in cash, which values Jazztel at 3.4 billion euros. That will be financed through a combination of hybrid bonds and a capital increase of up to two billion euros at Orange.
Jazztel shares rose. Orange’s fell because of the share issue plan.
Consolidation in the Spanish telecoms sector is being driven by tough competition and falling prices in the country’s deep recession.
When number two mobile operator Vodafone agreed to buy cable operator Ono in March for 7.2 billion euros, Orange found itself isolated without a fixed-line network.
Leader Telefonica has increasingly pushed discounted bundles of fixed and mobile services to keep customers loyal.
Buying Jazztel would give Orange about 1.5 million broadband subscribers and help it match competitors’ fixed, TV and wireless packages.