Latest news with #VMO2
Yahoo
6 days ago
- Business
- Yahoo
CityFibre owners court Virgin Media O2 in race to avoid cash crunch
CityFibre's owners have held talks with Virgin Media O2 (VMO2) over a potential rescue deal as the challenger broadband company scrambles to stave off a cash crunch. Two major investors in CityFibre – Abu Dhabi sovereign wealth fund Mubadala and Goldman Sachs – have approached VMO2 in recent months to discuss options for the company, including a potential sale. Discussions have also taken place with CityFibre's lenders, which include NatWest, Societe Generale and Credit Agricole. One source said the approaches, which came through VMO2's parent companies Liberty Global and Telefonica, were exploratory in nature and discussions are not thought to be ongoing. However, the overtures underscore growing uncertainty over CityFibre's future as a deadline to secure more cash looms. Bosses last year warned the company would run out of funding in mid-2025 'in all scenarios' and issued a going concern warning. Analysts at Redburn Atlantic have branded the financial position 'precarious'. The talks also suggest CityFibre's backers are skirting around chief executive Greg Mesch. CityFibre, which is the largest challenger 'alt-net' company vying to take on BT, has been locked in negotiations to secure more funding for at least nine months, but no agreement has yet been reached. Lenders have appointed investment bank Lazard to advise them in the talks as they seek a further cash injection from existing shareholders. But the process has been complicated by troubles at TalkTalk, another broadband company, which has fallen behind on payments to some suppliers. Industry sources said the uncertainty was unlikely to help the refinancing process given an estimated 150,000 TalkTalk customers are on CityFibre's network, representing almost 30pc of the alt-net's total connections. Speaking at a conference this week, Mr Mesch said: 'We've taken longer and we're working harder on a larger financing today that will accommodate M&A [mergers and acquisitions]. 'It's hard enough to do a financing, but we have to accommodate a financing that will allow us to consolidate not only networks but debt.' A CityFibre spokesman said: 'Any speculation about a potential sale is unfounded. CityFibre is in a strong position and we expect to announce details of our financing shortly, supporting our role in consolidating the sector and accelerating CityFibre's next phase of growth.' CityFibre's shareholders added: 'All shareholders remain committed to CityFibre's long-term success and are actively engaged in supporting the company's next phase of growth.' It is not the first time a potential deal between CityFibre and VMO2 has been explored, with a takeover bid first discussed two years ago. However, analysts have warned any such tie-up would likely require a significant write-down of CityFibre's debts, which stand at roughly £4bn. It comes as VMO2 faces uncertainty over the future of its new wholesale division, which is aimed at taking on BT's Openreach. But the plans have been put on ice while Telefonica, VMO2's Spanish parent company, carries out a strategic review. Virgin Media O2, Mubadala and Goldman Sachs declined to comment. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
6 days ago
- Business
- Yahoo
CityFibre owners court Virgin Media O2 in race to avoid cash crunch
CityFibre's owners have held talks with Virgin Media O2 (VMO2) over a potential rescue deal as the challenger broadband company scrambles to stave off a cash crunch. Two major investors in CityFibre – Abu Dhabi sovereign wealth fund Mubadala and Goldman Sachs – have approached VMO2 in recent months to discuss options for the company, including a potential sale. Discussions have also taken place with CityFibre's lenders, which include NatWest, Societe Generale and Credit Agricole. One source said the approaches, which came through VMO2's parent companies Liberty Global and Telefonica, were exploratory in nature and discussions are not thought to be ongoing. However, the overtures underscore growing uncertainty over CityFibre's future as a deadline to secure more cash looms. Bosses last year warned the company would run out of funding in mid-2025 'in all scenarios' and issued a going concern warning. Analysts at Redburn Atlantic have branded the financial position 'precarious'. The talks also suggest CityFibre's backers are skirting around chief executive Greg Mesch. CityFibre, which is the largest challenger 'alt-net' company vying to take on BT, has been locked in negotiations to secure more funding for at least nine months, but no agreement has yet been reached. Lenders have appointed investment bank Lazard to advise them in the talks as they seek a further cash injection from existing shareholders. But the process has been complicated by troubles at TalkTalk, another broadband company, which has fallen behind on payments to some suppliers. Industry sources said the uncertainty was unlikely to help the refinancing process given an estimated 150,000 TalkTalk customers are on CityFibre's network, representing almost 30pc of the alt-net's total connections. Speaking at a conference this week, Mr Mesch said: 'We've taken longer and we're working harder on a larger financing today that will accommodate M&A [mergers and acquisitions]. 'It's hard enough to do a financing, but we have to accommodate a financing that will allow us to consolidate not only networks but debt.' A CityFibre spokesman said: 'Any speculation about a potential sale is unfounded. CityFibre is in a strong position and we expect to announce details of our financing shortly, supporting our role in consolidating the sector and accelerating CityFibre's next phase of growth.' CityFibre's shareholders added: 'All shareholders remain committed to CityFibre's long-term success and are actively engaged in supporting the company's next phase of growth.' It is not the first time a potential deal between CityFibre and VMO2 has been explored, with a takeover bid first discussed two years ago. However, analysts have warned any such tie-up would likely require a significant write-down of CityFibre's debts, which stand at roughly £4bn. It comes as VMO2 faces uncertainty over the future of its new wholesale division, which is aimed at taking on BT's Openreach. But the plans have been put on ice while Telefonica, VMO2's Spanish parent company, carries out a strategic review. Virgin Media O2, Mubadala and Goldman Sachs declined to comment. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Mint
29-05-2025
- Business
- Mint
Telefonica Chairman's M&A Ambitions Face Old Debt Challenges
(Bloomberg) -- Telefonica SA's new chairman is running into an old problem. After the better part of a decade focused on cutting debt, the company still doesn't have the cash it needs to chase deals and growth. The Spanish phone carrier is looking for diverse ways to simplify its structure by buying out partners in joint ventures and reorganizing certain operations to make itself more flexible for potential deals in the European telecommunications industry. Executive Chairman Marc Murtra, who took over in January, has ordered a strategic review to be unveiled in the second half of the year. But even after cutting net debt by €23 billion ($26 billion) over nine years, the company is still one of the most leveraged large telecom carriers in Europe and holds the lowest investment-grade credit rating from three major ratings firms — limiting its ability to raise funds. Murtra has said repeatedly that maintaining investment grade is a must. 'The problem is they don't have a lot of flexibility,' said New Street Research analyst James Ratzer. 'The leverage situation is not great.' Telefonica declined to comment. A dividend cut could help free up funds, but the company hasn't signaled that's under consideration. Major shareholders, including the Spanish government and CriteriaCaixa SA, are open to considering a capital increase to pay for acquisitions or cut debt, Bloomberg has reported. Murtra has accelerated long-standing plans to divest most Latin American operations and pledged to focus on Europe and Brazil. He is looking at ways to potentially buy out partners in at least two joint ventures - the VMO2 carrier in the UK and a Brazilian fiber-broadband operator, Bloomberg has reported. By selling Latin American assets, Telefonica can focus more on core operations, which 'could support higher leverage than the previous configuration of the group,' Chief Financial Officer Laura Abasolo said this month. 'More free cash flow coming from other geographies improves credit quality,' she said. Murtra says consolidation would help Telefonica and European rivals gain much needed scale in its existing markets — this means doing deals in the UK, Germany and Spain. Telefonica owns 50% of VMO2 and a hypothetical acquisition of Liberty Global's 50% stake would put its debt ratio at about 4.3 times earnings before interest, taxes, appreciation and depreciation, Ratzer estimates. Since the two partners created VMO2 in 2021, they have struggled to retain market share in both broadband and mobile. 'There's no way the company can live with that type of leverage,' Ratzer said, adding that a rights issue to fund such a deal would be 'very material' at '€18 billion or so' and still wouldn't significantly reshape the UK market. Genuine consolidation would require buying smaller upstart fiber broadband operators. In Germany, Telefonica could potentially try to buy 1&1 AG, but its main shareholder hasn't shown interest in selling in the past. Local operations have struggled with strong competition, especially over the last few quarters. In Spain, potential targets could include Digi Communications NV's local unit and Vodafone Espana, owned by British buyout firm Zegona Communications Plc, although Telefonica said May 21 that there were no negotiations for Vodafone. The business has been struggling to grow profit in the country for years and has long been posting sales growth below inflation. So far, the few signals about Murtra's plans have yet to convince creditors. Several Telefonica bonds led by a 1.715% note due in 2028 traded wider than normal relative to peers in the days after the news of the VMO2 plans. The company's five-year senior credit default swaps widened by the most in more than five years on May 14. 'Many investors seem comfortable with the name, this is also reflected in the solid market capitalization,' said ING's Technology, Media and Telecommunications credit strategist Jan Frederik Slijkerman. 'However, spreads moved strongly wider on the headlines about potential acquisitions. This shows that investors are not really open to the idea of Telefonica taking on more debt.' More stories like this are available on
Yahoo
15-05-2025
- Business
- Yahoo
Virgin Media O2's Spanish co-owner explores full takeover
Virgin Media O2's Spanish co-owner is said to be exploring a full takeover of the telecoms giant amid a shake-up triggered by Pedro Sánchez, Spain's prime minister. Telefonica, which holds a 50pc stake in VMO2, is exploring plans for a deal that would allow it to buy out its US joint venture partner Liberty Global. Marc Murtra, the Telefonica chairman, has held discussions with advisers though no formal proposals have yet been drawn up, Bloomberg reported. Telefonica could look to take full control of VMO2 as part of a broader effort to build scale across Europe. Discussions over the future of the joint venture come at a critical juncture for the UK's telecoms market. Vodafone and Three are finalising a £15bn merger that will create Britain's largest mobile network operator – with around 27m customers. Meanwhile, the broadband industry is bracing for a wave of consolidation as a slew of challenger providers, known as 'alt nets', struggle to dent BT's dominance in the full-fibre rollout. VMO2, which has more than 45m mobile and broadband customers in the UK, was formed through a £31bn mega merger in 2021. However, Telefonica has since written down its stake and the future of the joint venture has been plunged into uncertainty as the Madrid-based telecoms company carries out a sweeping strategic review. Mr Murtra initiated the review after he was installed by the Spanish government, which holds a 10pc stake in Telefonica, following the shock ousting of long-serving boss José María Álvarez-Pallete earlier this year. The upheaval has already led to Liberty Global halting the search for external funding for VMO2's new wholesale division, which was supposed to launch in the first half of the year but has now been delayed. A lock-up period stipulated under the terms of VMO2's 2021 merger has now expired, meaning either company can initiate a stock market float. Emilio Gayo, Telefonica's chief operating officer, said: 'We're very happy with the current situation. The joint venture is working very well, we don't have any proposals on the table to change that situation at the moment. 'Both companies, Liberty and Telefonica, are trying to find the best ways to develop the business.' It is unclear how any deal initiated by Telefonica would handle VMO2's debt pile of close to £22bn. Telefonica itself had net debt of €27bn (£22.7bn) at the end of the first quarter. Liberty Global is also thought to have considered spinning off VMO2, similar to its recent listing of Swiss telecoms operator Sunrise. VMO2 and Liberty Global declined to comment. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Telegraph
15-05-2025
- Business
- Telegraph
Virgin Media O2's Spanish co-owner explores full takeover
Virgin Media O2's Spanish co-owner is said to be exploring a full takeover of the telecoms giant amid a shake-up triggered by Spain's prime minister Pedro Sánchez. Telefonica, which holds a 50pc stake in VMO2, is exploring plans for a deal that would allow it to buy out its US joint venture partner Liberty Global. Marc Murtra, the Telefonica chairman, has held discussions with advisers though no formal proposals have yet been drawn up, Bloomberg reported. Telefonica could look to take full control of VMO2 as part of a broader effort to build scale across Europe. Discussions over the future of the joint venture come at a critical juncture for the UK's telecoms market. Vodafone and Three are finalising a £15bn merger that will create Britain's largest mobile network operator – with around 27m customers. Meanwhile, the broadband industry is bracing for a wave of consolidation as a slew of challenger providers, known as 'alt nets', struggle to dent BT's dominance in the full-fibre rollout. VMO2, which has more than 45m mobile and broadband customers in the UK, was formed through a £31bn mega merger in 2021. However, Telefonica has since written down its stake and the future of the joint venture has been plunged into uncertainty as the Madrid-based telecoms company carries out a sweeping strategic review. Mr Murtra initiated the review after he was installed by the Spanish government, which holds a 10pc stake in Telefonica, following the shock ousting of long-serving boss José María Álvarez-Pallete earlier this year. The upheaval has already led to Liberty Global halting the search for external funding for VMO2's new wholesale division, which was supposed to launch in the first half of the year but has now been delayed. A lock-up period stipulated under the terms of VMO2's 2021 merger has now expired, meaning either company can initiate a stock market float. Emilio Gayo, Telefonica's chief operating officer, said: 'We're very happy with the current situation. The joint venture is working very well, we don't have any proposals on the table to change that situation at the moment. 'Both companies, Liberty and Telefonica, are trying to find the best ways to develop the business.' It is unclear how any deal initiated by Telefonica would handle VMO2's debt pile of close to £22bn. Telefonica itself had net debt of €27bn (£22.7bn) at the end of the first quarter. Liberty Global is also thought to have considered spinning off VMO2, similar to its recent listing of Swiss telecoms operator Sunrise.
