France's Orange has reached a deal to buy Spanish fixed line telecoms operator Jazztel in an effort to bolster its mobile operation in the country and better compete with rivals Telefonica and Vodafone.
The French group made an offer for 100% of Jazztel shares at 13 euros per share in cash, which values Jazztel at 3.4 billion euros($4.40 billion U.S.). The acquisition will be financed through a combination of hybrid bonds and a capital increase of up to 2 billion euros at Orange.
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 rose 6%. Orange fell 1.2% because of the share issue plan.
Consolidation in the Spanish telecoms sector has been brewing for months, driven by tough competition and falling prices in a deep recession.
When number two mobile operator Vodafone Group agreed to buy cable operator Ono in March for 7.2 billion euros, Orange found itself isolated without a fixed-line network. Leader Telefonica has increasingly pushed discounted bundles of fixed and mobile services to keep customers loyal.
Buying Jazztel would give Orange about 1.5 million broadband subscribers and help it match competitors' fixed, TV and wireless packages. It plans to keep both brands since Jazztel's image is stronger among budget-conscious customers.
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