MasMovil moves for Euskaltel, pledges to retain Basque identity

Just months after Euskaltel launched its play for nationwide presence in Spain, the market’s most aggressive competitor MasMovil has swooped in and snapped it up.

Although Euskaltel is much smaller than MasMovil it is arguably its biggest competitor. It has declared itself Spain’s fifth operator – much like MasMovil pushed itself forward as the market’s number four player a few short years ago – and last year kicked off its bid to expand services across the country, having previously been a regional player. It was the only company likely to challenge MasMovil for the fourth spot, however unlikely it achieving such a growth rate might have been, but now MasMovil has put paid to any threat from behind by launching a takeover offer.

MasMovil has offered up to €2 billion for all of Euskaltel’s shares and has already secured the support of its biggest holders, who together claim more than 52% of the company. It’s €11.17-per-share offer – a 26.8% premium over its weighted average share price over the past six months – is conditional on an acceptance rate of 75% plus one share.

It also needs various competition authority and regulatory approvals in order to go ahead.

As such, MasMavil is making the usual pledges about the benefits of the transaction to all concerned.

“We are convinced that the transaction we are announcing today pushes the growth of the industry in Spain and is good both for Euskaltel’s shareholders and employees and, above all, for its customers, as they will be able to benefit from access to our fibre and mobile infrastructure, as well as from increased investment in the territories in which it operates,” said MasMovil Group chief executive Meinrad Spenger, in a statement.

The deal is, of course, primarily good for MasMovil, which will add a fair number of customers to its portfolio. Euskatel had more than 800,000 mass market customers at the end of last year, the majority of which are on the fixed side. According to MasMovil, the merged entity would have more than 14 million lines, a fibre coverage footprint of 26 million homes and combined annual revenues of around €2.7 billion.

It also gains a number of strong brands. Euskeltel uses its own brand in its core Basque Country market, as well as operating as R in Galicia and Telecable in Asturias. It is also pushing into the rest of Spain with a converged fixed broadband, mobile and TV offer using the Virgin Telco brand, a campaign that seems to be showing early success; despite the obvious difficulties posed by the Covid-19 pandemic, the brand had signed up 71,000 customers by the end of last year, having launched in May, well ahead of the company’s – admittedly fairly conservative – target.

MasMovil has committed to keeping Euskaltel’s various brands, and to retaining its staff and regional headquarters, for a five-year period. That’s a smart move, both from a PR perspective, and operationally; Euskaltel has been operating in the Basque Country for the past 25 years under a Basque brand.

Whether regional loyalties will come into play when shareholders have to decided whether or not to take up the offer remains to be seen, although the above commitments on brand and jobs should help matters, as should MasMovil’s pledge to increase access to 5G and fibre networks in the Basque Country. The support of shareholders Zegona, Kutxabank and Alba Europe gives MasMovil a strong base to work from, and there’s also that price premium to take into account.

MasMovil still has to convince the regulators though. And they will be looking closely at this deal, particularly given the way MasMovil has hoovered up many of its smaller competitors over the past few years. This deal makes sense, but it’s not a done deal.