Market Insight

Vodafone launching joint fibre service in Spanish market

January 23, 2014  | Subscribers Only


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Vodafone Spain will be launching its fibre-to-the-home (FTTH) broadband services in April 2014 on the FTTH network rolled out as a result of its joint venture with Orange Spain. The service will be initially available in the 800,000 premises covered by the EUR 1 billion (USD 1.3 billion) network, increasing to 3 million by September 2015 and 6 million in 2017. Twelve cities will be covered by the network: Madrid, Barcelona, Seville, Malaga, Valencia, Alicante, Zaragoza, Cordoba, Valladolid, Alcorcon, Badalona and Hospitalet de Llobregat.

The announcement follows the signing of a network sharing agreement with between the Vodafone/Orange joint venture and Telefonica in mid 2013. Both Orange and Vodafone launched individual services on a smaller scale back in 2010, and Orange Spain recently unveiled its latest promotional offer for services on its FTTH network. For EUR 40.95 per month Orange Spain mobile customers can sign up for fibre broadband services with a 100 Mbps downstream speed and 10 Mbps upload speed.

 

Vodafone has a clear strategy with respect to its future in the Spanish broadband market. This market is a particularly difficult one to enter due to the strength of Telefonica (with 6 million broadband subscribers representing a 50% market share) and the current economic climate which will limit the spending power of potential Spanish consumers. However, Vodafone’s joint venture is a clever way of entering the FTTH market while minimizing the financial risk, and signing a network sharing agreement with Telefonica early on allows them to establish ground rules with the Spanish incumbent before the service launch.

It seems like this is part of a larger plan for Vodafone, since the telco has recently made its presence felt in other markets as well. Vodafone recently announced the purchase of a 7% stake in Greek ISP and pay-TV operator ForthNet – showing its commitment to the Greek broadband market despite the EUR 250 million (USD 343 million) civil lawsuit served by Greek telecoms retailer MTS in December 2013. MTS is alleging that Vodafone, who owns a 40% stake in MTS, restricted its ability to operate and prevented MTS from listing on the Athens stock exchange. 

 

Not content with excitement overseas, Vodafone is allegedly in discussions with BSkyB about ways to contend with BT’s renewed success in the UK broadband market. Despite Vodafone’s USD 130 billion windfall due to the sale of Verizon Wireless in September 2013, a joint roll-out of a UK-based fibre network similar to the Vodafone/Orange Spain hybrid is not necessarily a financially feasible choice. Making a huge upfront investment would be risky in such a competitive retail market. Alternative joint ventures such as a deal between the two parties allowing Vodafone to offer a quad play bundle including TV, landline phone, broadband and mobile, might allow the two companies to test the waters without committing to substantial upfront costs.

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