ONO’s Galdon ousted in coup

Spanish cable head replaced by retail expert

In a boardroom coup with ramifications for Spain’s highly competitive cable TV biz, Eugenio Galdon has been forced to step down as chairman of ONO, Spain’s biggest cable operator.

He will be replaced by Jose Maria Castellano, former CEO of fashion retailer Inditex, which owns the Zara chain of clothing shops.

Underscoring the pressures on Spain’s cable TV operators, Galdon’s ouster on Thursday also looks set to usher in strategy changes at ONO, which may well see it beefing up on TV content.

“Under Galdon, ONO had focused on network deployment, which is very cash-intensive. Its major shareholders want to concentrate more on returns, improving penetration using the existing network,” said a Madrid-based analyst.

Boasting 1.9 million customers in Spain, and owned by risk capital firms Thomas H. Lee (24.8%), Quadrangle (8.8%), Providence 14.8% and CCMP (14.8%), ONO posted first nine-month net profits of E20 million ($25.6 million).

But, given the large cost of cable lay-down, it faces a towering debt of $4.9 billion.

Though adding pay TV clients — up from 922,000, in the second quarter of 2007, to 1,053,000 by June — ONO’s made little headway in clawing market share away from giant Spanish telco Telefonica in new broadband Internet clients.

ONO’s second quarter Internet service sales ($165.8 million), repped just 13.3% of total Internet service revenues in Spain.

Triple-play — bundled broadband, fixed telephony and cable TV — now drives client growth at Spanish telcos.

But customers in Spain, as elsewhere, largely choose their triple-play operator on the basis if its TV offer.

“ONO will need to be more aggressive on pricing and content,” the analyst said.

Like other European triple-play players — such as France Telecom, which has signed exclusive content deals with Warner Bros. Intl. TV, HBO and MGM this year — the future for ONO may well see it buying more TV content, hiking competition with Telefonica IPTV Imagenio.

One key question for ONO is how that potential content drive plays out under Castellano, a specialist in consumer economics given his past with Inditex.

(Emiliano de Pablos contributed to this report.)

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