Merger of Portugal’s Optimus and Zon wins board approval

Portuguese operators Optimus and Zon Multimedia look set to merge to form the country’s second-biggest player, behind Portugal Telecom, after directors from both companies gave their blessing to the tie-up.

Under the terms of the deal, Optimus (Porto, Portugal) will be incorporated into Zon (Lisbon, Portugal) and its shareholders will hold a 40% stake in the combined entity, which will operate under the name of Zon Optimus.

Besides controlling 26% of the market, the new company will have revenues of €1.6 billion and an operating profit of about €540 million.

Portuguese operators Optimus and Zon Multimedia look set to merge to form the country’s second-biggest player, behind Portugal Telecom, after directors from both companies gave their blessing to the tie-up.

Under the terms of the deal, Optimus (Porto, Portugal) will be incorporated into Zon (Lisbon, Portugal) and its shareholders will hold a 40% stake in the combined entity, which will operate under the name of Zon Optimus.

Besides controlling 26% of the market, the new company will have revenues of €1.6 billion and an operating profit of about €540 million.

The transaction still requires the approval of regulatory authorities.

The merger should address the shortcomings of Optimus and Zon as individual players, while relieving some of the pricing pressure in the competitive Portuguese market.

The number-three player in the mobile market, Optimus has been losing market share in the fixed-line sector, at least partly because it lacks access to Portugal Telecom’s FTTH network.

Meanwhile, leading cable company ZON has struggled as an MVNO, growing its customer base by just 5,000, to 138,000, between September 2011 and September 2012.

Besides opening up cross-selling opportunities, the merger would also help each company to reduce costs.

Optimus currently rents capacity on the network of Portugal Telecom (Lisbon, Portugal) but could move its broadband customers to Zon’s cable infrastructure and reduce its expenses.

Likewise, Zon rents mobile capacity from Vodafone, the number-two mobile player, but will no longer need the MVNO arrangement following the merger.

“The merger will result in a group capable of investing and promoting its own and the sector’s competitiveness, of creating greater shareholder value and new opportunities for employees, clients and suppliers,” said the companies in a statement. “It will create a new Group with a sustainable strategy for growth, international expansion and optimized management and in which the sharing of experience and expertise between the teams will play a decisive role.”