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* Spain's main cable operator eyes early 2014 IPO - sources
* Profit falling, but optic fibre asset lures investors
* Move could trigger wave of deals in Spanish telco sector
By Julien Toyer
MADRID, Dec 10 (Reuters) - Spain's main cable operator Onois considering an initial public offering for some of its sharesin the first half of 2014, two sources with knowledge of thematter said, a move which could speed up consolidation in thepressured Spanish telecom sector.
While the sources noted that no final decision had yet beenmade on whether to partially list the company, they said Ono'smanagement was keen to take advantage of renewed interest inSpanish assets from foreign investors and of a slight uptick inthe country's economic performance to move ahead with the plan.
If confirmed, it would be the second initial public offering(IPO) of a European cable firm in a few months, after France'sNumericable last month raised 652.2 million euros ($895 million)to help cut debt and upgrade its network.
"They've seen the strong demand for Numericable shares inFrance and they want to push on with the listing," said one ofthe sources on condition of anonymity.
Business daily Expansion said on Tuesday the plan could takethe form of a share offering coupled with a capital increase andthat both moves would likely be discussed at Ono's next boardmeeting, due in the next few weeks.
Ono, which has repeatedly said in the past that going publicwas a possibility, declined to comment.
The cable operator posted a 15-million-euro loss in the ninemonths to September and its TV business is losing clients ascash-strapped Spaniards cut leisure spending, but its opticfibre network could be an asset for telecom operators eager tosell high-margin data services.
The sources said Ono, once partially listed, would likely bea takeover target for bigger competitors Vodafone andOrange, which are trying to capture a larger share ofthe Spanish market to make headway against former monopolyTelefonica.
"A listing would put a price on the asset and make it apalatable target for the likes of Vodafone or Orange, whosemargins have been seriously pressured by the ongoing war onprices," said the source.
DEALS ?
Most Spanish telecom operators have been offering cheaperdeals over the past few months in a bid to retain clients.
The trend was triggered after Telefonica last year launcheda so-called quadruple-play offer which bundles fixed and mobilephone contracts with internet and TV services and is sold at acheaper price than each service individually.
Analysts believe the price war is laying the ground formarket consolidation with smaller players Ono, Jazztel and Yoigo, owned by Teliasonera. in the spotlight.
"Vodafone's urgent need to compete more with Telefonica'sproactive quadruple-play offer means cable operator Ono andJazztel could be potential targets," said Deutsche Bank in anote released to clients on Tuesday.
The second source also said that Orange had been looking atways to boost its Spanish business although any specific movewould have to wait until next year and a possible change in themanagement of the French company.
Ono could benefit from a comparatively cheaper valuationthan Jazztel, whose shares have risen more than 44percent this year.
But it also needs to address falling profits and high debtto lure investors. Ono's debt, at 4.65 times its earnings beforeinterest, taxes, depreciation and amortization is high incomparison with peers.
"In order to move ahead, they need one or two quarters ofgood earnings and profit, a less competitive environment andSpanish good macroeconomic data," said the second source.
Consumer spending has showed recent signs of stabilising andSpanish authorities expect the economy to grow between 0.2percent to 0.3 percent in the last quarter of the year and toexpand by at least 0.7 percent in 2014.
