Zegona looks to new acquisition opportunities as Telecable posts solid results

UK-based cable and telecom investor Zegona Communications’ chairman and CEO Eamonn O’Hare has said the market environment for the company’s core ‘buy-fix-sell’ strategy has “never been better” and that he was confident additional acquisition opportunities would emerge.

O’Hare’s comments accompanied solid full-year results for Zegona, whose chief asset is Spanish regional cable operator Telecable, which operates in the Asturias region of northern Spain.

Zegona has been in talks with the other main Spanish regional operator, Basque Country-based Euskaltel, about a merger to create a unified northern Spanish operator spanning the Basque Country, Asturias and Galicia, where Euskaltel controls the local player, R.

Those negotiations have yet to come to a conclusion. Euskaltel, heavily indebted, has reportedly proposed a mix of cash and shares to acquire Telecable, with Zegona reportedly holding out for greater influence within the merged entity. Zegona has also reportedly been looking to make further smaller acquisitions in regions outside Asturias, which could potentially force a change in terms.

Both Telecable and Euskaltel are meanwhile facing intensified competition from Spain’s three major operators Telefónica, Vodafone and Orange, as well as from independent mobile operator MásMóvil. Vodafone recently struck a deal with Telefónica to extend the reach of its fibre network using Telefónica’s infrastructure.

Telecable posted revenues of €138.5 million for the year, up 3%, and EBITDA of €65.1 million, up 0.2% despite what the company described as “significant investment in football content”.

Telecable’s cash flow grew by 9.7% to €39.6 million, boosted by cost efficiencies.

O’Hare said that “Telecable’s growth has outperformed other players in the Spanish market in recent years” and added that Zegona was “encouraged by the increasing momentum in the business and the fact this is underpinned by a strong Spanish economy and further evidence of industry price repair”.

He confirmed that Zegona would increase its dividend by 11% to 5p per share for 2017.

“As we look across the broader European TMT landscape, the dynamic forces of consumer consumption, industry consolidation and convergence are creating significant opportunities for new acquisitions,” said O’Hare.

“In fact, since creating Zegona almost two years ago, it is my personal view that the market environment to execute our core Buy-Fix-Sell strategy has never been better. We are seeing a steady increase in the number of new opportunities and are confident that additional acquisitions satisfying our disciplined financial criteria will be identified.”