French Telecom operator “Orange” offered a deal to buy Spanish fixed line telecoms operator Jazztel at 3.4 billion euros in an act of expanding its boundaries.
Orange intends to brace and expand its service to compete with the other well established rivals Vodafone and Telefonica. The French Telecom group offered for 100% Jazztel shares at 13 euros per share in cash, which values Jazztel at 3.4 billion euros($4.40 billion). This deal is supposed to be funded my multiple bonds.
The agreement is subject to regulatory approval and to winning the backing of at least 50.01 percent of shareholders on top of the 14.5 percent of the shares that Jazztel Chairman, Leopoldo Fernandez Pujals has already agreed to sell.
Jazztel shares during after hours of this acquisition rose 6 percent to 12.75 euros while Orange fell 1.2 percent because of the share issue plan.
Orange Chief Executive Stephane Richard stated:
We are doing this deal to accelerate our growth in Spain, particularly in fixed-mobile convergent offers
Vodafone in march acquired cable operator Ono for 7.2 billion euros while Telefonica maintained to bind their customers by successive offers and discounts.With all this happening, Orange realised the need of procuring a fixed-line network.
Acquiring Jazztel would give Orange about 1.5 million broadband subscribers and help to survive in the battle. Orange plans to keep both brands since Jazztel’s image is stronger among budget-conscious customers.
Orange said the deal would add to earnings per share and operating free cash flow by 2017, and would help it save 1.3 billion euros mostly through network efficiencies. Jazztel now rents capacity on Orange’s network to provide mobile services.