Vodafone Group plc Buys Spain’s Ono For £6bn

The share price of Vodafone (LSE: VOD) (NASDAQ: VOD.US) rose a little under 1% to 224p during early trade this morning, after the telecoms operator acquired the Spanish firm Ono for £6bn.

The deal will see the UK company further advance into the “unified” communications market in Europe, with Ono described as Spain’s leading provider of broadband, pay-TV and fixed communications.

vodafoneOno has nearly 2 million customers and the acquisition values it at 7.5 times earnings.

Vodafone is flush with cash after the Verizon sale, and the Vittorio Colao, the firm’s chief executive, has previously expressed that he is looking at acquisitions that could “transform” the company.

He added this morning:

“The combination of Vodafone and Ono creates a leading integrated communications provider in Spain and represents an attractive value creation opportunity for Vodafone. Demand for unified communications products and services has increased significantly over the last few years in Spain, and this transaction – together with our fibre-to-the-home build programme – will accelerate our ability to offer best-in-class propositions in the Spanish market. We look forward to welcoming the management and employees of Ono to Vodafone and working together to serve our customers across Spain”.

Vodafone is struggling in Europe at the moment, reporting a 10% decline in European revenue for the three months ended 31 December.

Analysts expect Vodafone’s upcoming annual results to reveal earnings per share of 17p in support of a dividend equivalent to 10p per share.

Therefore, at the current share price, Vodafone trades on a price/earnings ratio of 14 and offers a possible income of 4.5%.

Of course, the decision to ‘buy’ — taking into Vodafone’s acquisition strategy and its potential to turn things around in Europe, as well as the wider prospects for the telecoms industry — remains your decision.

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Mark does not own shares in Vodafone.