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ONO losses deeper than anticipated

Vodafone has put its Spanish cable MSO subsidiary ONO’s accounts in order, revealing losses of €642 million a deeper financial hole than expected when the company bought the operator in 2014.

ONO, which Vodafone bought last year for €7.2 billion, closed 2014 with consolidated losses of €642 million, after repurchasing debt, admitting the depreciation of assets, making provisions for defaulting clients, accepting Tax Agency reports pertaining to fraud committed by the previous management and paying out large bonuses to directors

Vodafone had already admitted that Ono’s consolidation had left a €400 million hole in the group’s accounts for part of the last tax year. But now the accounts reveal that those losses totalled €642.2 million for the whole of 2014 – most of which was attributable to the company’s operating subsidiary Cableuropa, now renamed Vodafone Ono, which lost €576 million.

Everything conspired against Ono last year, from a drop in sales and margins to the extraordinary negative results caused by the rise in the dollar. Part of the losses can be attributed to decisions taken by the new management team, which decided to impose order on the company’s balance sheet. Vodafone opted to cancel Ono’s sizeable debt and the repurchasing process has entailed paying significant early repayment fees.

The Vodafone Group has handed Cableuropa a subordinated loan of up to €3.8 billion, maturing in 2021 and pegged to the Euribor, in order to allow it to free itself of the expensive debt with which it was financing itself. The premiums and expenses paid out for cancelling the various loans and debt issues have meant an outlay of €285 million. Another key element has been the official Spanish Tax Agency reports identifying fiscal fraud relating to the deducting of VAT in the billing of certain suppliers, which has meant paying out €73.1 million in contributions, fines and other charges, plus a further €4.4 million in other taxes. The inspection also resulted in the termination of €30 million in tax credits.

Ono has also admitted clocking up €11.6 million in losses over the 2.6Ghz mobile spectrum licences that it was forced to hand back as a result of a government ruling Further losses came as a result of a deterioration of fixed assets and replacing fibre optic cables and power equipment. The company has also had to spend €77.6 million in order to make provisions for onerous rental contracts, litigation, an incentive plan for a small group of directors, and other risks.

As Cableuropa’s debt was in US dollars, it suffered negative exchange differences totalling €102.1 million in 2014 as a result of the rise in the currency. Nevertheless, the net effect was limited to €15.6 million thanks to coverage and agreed rates. Ono’s revenue fell 6.3 per cent to €1.465 billion last year, above all because of a decline in the number of new customers it was able to lure away from other operators.

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