- Some rare news of incoming M&A at retrenching UK Group, with a small add-on buyout of Portuguese rival Nowo.
- Vodafone calls it a ‘reinforcing’ transaction, only giving a partial catchup in battle with main rivals MEO and NOS.
- Nowo owner MÁSMÓVIL seen as a willing seller.
- 2021 auction and introduction of new entrants provide backdrop.
Vodafone Portugal has made a market share grab with the agreement of a deal to absorb smaller rival Nowo Communications.
The previously mooted buyout — which needs to get past regulators — will see the operator consolidate Nowo via Cabonitel, the vehicle through which it is controlled by Spanish challenger (and Vodafone Spain nemesis) MÁSMÓVIL.
It is not yet clear how much Vodafone has agreed to shell out for Nowo — which is Portugal’s fourth-largest ‘converged operator’, behind the country’s big three of Vodafone, NOS, and market leader Altice Portugal (MEO), and was fully taken over by MÁSMÓVIL in 2021. Spanish newspaper Cinco Días cited market sources as valuing Nowo at about €150m (£132m).
The agreement will provide the Portuguese OpCo with an opportunity to take out a discounting and expanding rival, and in the process gain an add-on of about 250,000 mobile users and 140,000 wireline (broadband/pay-TV) customers. These are small but meaningful gains of approximately 5% and 16%, respectively, for Vodafone’s own mobile and broadband bases (4.7 million and 890,000 at 30 June).
The buyout has infrastructure components, too — with Nowo said to pass about one million homes with its broadband network, and having recently entered the spectrum acquisition fray with the purchase of rights to 1800MHz, 2.6GHz, and 3.6GHz airwaves in Portugal’s mammoth auction in 2021 (Vodafonewatch, #200). Currently, Nowo operates in mobile as a virtual operator, using MEO as a platform.
Vodafone Portugal itself acquired 700MHz and 3.6GHz licences in that controversial, 200-day sell-off, and having also renewed 900MHz and 1800MHz concessions during 2021, now owns a spread of rights across seven bands. On fibre, the OpCo claimed to pass 4.2 million homes at 30 June, either via its own network or via partnerships with MEO and NOS (Vodafonewatch, #126 and #131).
| Band | Holding | Expiry |
|---|---|---|
| Source: Vodafone. | ||
|
700MHz |
2×10MHz |
2041 |
|
800MHz |
2×10MHz |
2027 |
|
900MHz |
2×5MHz, 2×5MHz |
2027, 2033 |
|
1800MHz |
2×14MHz, 2×6MHz |
2027, 2033 |
|
2.1GHz |
2×20MHz |
2033 |
|
2.6GHz |
2×20MHz, 25MHz |
2027 |
|
3.5GHz |
90MHz |
2041 |
‘Everyone wins’
Vodafone Portugal described the deal as a move to “reinforce its competitiveness in the market, providing it with greater scale and greater coverage”.
Further, with an eye on Portuguese regulators, it sought to present the buy as having “benefits for current and future customers, as well as for the sector”. Absorbing Nowo “creates the conditions for more efficient investments in high-speed connectivity networks, as well as in the development of innovative products and services”, it added.
Mário Vaz, Chief Executive of Vodafone Portugal, talked it up as “yet another demonstration of Vodafone’s and its shareholders’ commitment to the country”.
The OpCo hopes to complete the transaction in the first half of 2023.
Friends reunited
Some form of tie-up between Vodafone Portugal and Nowo has been mooted since at least 2015, when the latter was named Cabovisão and made available for purchase as part of regulatory obligations attached to the buyout of Portugal Telecom by France’s Altice Group (Vodafonewatch, #133).
Recent months have seen speculation revived, with Vodafone’s under-pressure Group management indicating Portugal was one of the markets where it was exploring consolidation opportunities to soften competition and improve performance.
There was also seen to be potential for tie in with talks taking place over a larger linkup with MÁSMÓVIL in Spain — although prospects for that ended in July with news of the latter’s proposed merger with Orange Spain (Vodafonewatch, #209).
Nowo has changed hands multiple times in recent years and MÁSMÓVIL was reported to be considering exiting the business in May, having apparently been caught by surprise by the entrance of Dixarobil, another facilities-based mobile newcomer, owned by Romania’s Digi Communications, in the same 2021 auction in which Nowo secured spectrum.
Deal to be pitched to regulators as small and digestible
Vodafone is coming towards M&A in Portugal from a different angle to other markets where defensive deals with rivals have been seen as more urgent to shore up performance, such as Italy and Spain — or in Hungary, where the local regulatory and political environment is getting complicated and the Group has chosen to exit (Vodafonewatch, #210 and passim).
Its leadership has been having grumbles over the operating environment in Portugal — particularly over the design of the 2021 auction — but local results have been strong. Vodafone Portugal has been the Group’s fastest growing Europe Region OpCo, bar Vodafone Turkey, in five of the last six quarters, generating a 6.7% increase in service revenue in the three months to 30 June. It has also been steadily growing market share.
According to regulator Anacom, the OpCo had a 21.5% share of residential broadband subscribers at 31 March, up six basis points year-on-year. At the same time, it has a lot of distance to make up on MEO (40.7%) and NOS (34.3%), and will be making that point to the authorities reviewing the deal. Nowo held a share of only 3.1% at that point and was said by Anacom to be losing ground.
