Masorange and Vodafone to sell 40% of their fibre optic subsidiary for $2bn

Masorange and Vodafone, which are the first and third operators telecommunications Spain’s customers have negotiated an agreement to establish a joint venture for a fixed fibre-optic broadband network (calledin netco or fibreco), of which They plan to sell about 40% of their capital to an institutional investor.. The investor is expected to look for groups that do not intend to have management control, given their minority status, but rather seek to make good profits. With this profile, potential investors will primarily be associated with insurance companies or pension funds.

The plan the two companies are negotiating is to now agree to sign a contract that would create a joint venture, and then begin searching for that investment partner. Once that partner is chosen, the company will be created. The state of the talks suggests that a final agreement could be reached in the coming weeks. This is being judged closing at the end of July, but if this is not achieved, it may skip to September.

The final dimension of the project, named after the keyword Surfing, This is slightly more than what was initially reported when EXPANSIÓN announced it on May 29. At that time, 10 or 11 million accesses to real estate assets (UUIIs, homes, offices and premises) were planned and We are currently talking about a figure of around twelve million UUIIs.

Masorang brings more

The group that will contribute the most to FTTH fibre assets will be Masorangeabout 9 million UUIIs, while Vodafone will invest in the new company more than 3 million units of FTTH real estate that it has deployed (in partnership with Orange and with MasMoville), as well as customers for a significant portion of their cable networks, since it is not the network assets that matter, but the customers who will pay for them in the long term. The final allocation of capital of a fiber optic company, or Fiberco, assumes that Masorange remains the main shareholder with a share of approximately 50%, with the investment partner acquiring 40% and Vodafone retaining approximately 10% of the capital.

The idea of ​​the two partners is that the ticket – the investment amount – will have to be taken on by the infrastructure fund. The amount will be between 1,500 and 2,000 million euros. according to informed sources.

Capital and debt

The fibre optic company scheme will be created with half equity and half debt, which would give the company a value of between €7,500 and €10 billion, including debt.

These resources, received from the investor’s contribution, will help the two promoter operators reduce their current debt levels.

One of the great advantages of the new organization is its scope. The Union MasMovil and Orange has already given it a high market share in fixed broadband, averaging 42% in Spain and regions such as the north, where the presence More detailsMobile was particularly strong thanks to the Euskaltel group, as were the Basque Country, Asturias and Galicia – clearly above 50%.

60% market share

But in addition, the addition of Vodafone, which controls about 18% of the shares, the joining of three large operators will give this network company the support of a mass of customers, which is about 60% of the entire market in any area. From Spain. This gives the potential investor great peace of mind and an important guarantee, since, although the market moves strongly and there are many ups and downs, most of them will occur between the brands of the companies involved in the Surf project, for example. . that for infrastructure purposes no income is lost.

The only time that fiber optic company shareholders would be willing to accept the risk of losing a wholesale customer would be when the brands’ customers Masorange and with Vodafone they went to Telefonica, O2 or Digicompanies that were left out of this infrastructure agreement.

This large market share and its advantages give a very high value to a future fiber optic company, although it may also cause competitive problems.

For this reason, one of the ideas that is being used in both groups is not to open a company so that the network can be used by third-party operators, but only to use it for self-sufficiency, that is, providing services to their own brands and clients. This operating model, which is called “not functional”allows to simplify the process of administrative approval by antitrust authorities.

Another Vodafone deal with Telefónica

The fact is that Vodafone is in talks for a major fixed broadband deal with Masorange does not mean that you cannot also reach another agreement with telephone. In fact Movistar and Vodafone As EXPANSIÓN reported on March 13, they have also been discussing this possibility for some time. Bilateral agreement Vodafone – On the one side Masorange in Netco and on the other telephone without the involvement of the joint Netco, but with the predictable receipt of prepayments from Movistar – this makes perfect sense, since it replicates what already happens naturally. Of the almost three million fixed broadband customers that Vodafone has in Spain, only 45% of users use the English firm’s own networks, both coaxial cable (with HFC technology) and fibre-to-the-home (FTTH), which cover a total of around 11 million properties in Spain. The rest, around 55% of the fixed user base, is currently distributed across both fibre networks. telephone as in those of Masorange. It is therefore logical that if Vodafone decides to switch all its cable TV customers to FTTH networks, it will do so while maintaining its current distribution. Moreover, since Movistar’s network is much larger than that of Masorange – the historical operator has 30 million UUIIs and Masorange remains at 17 million – many clients Vodafone which are in the coverage area telephone and they couldn’t move to the new joint Netco because it didn’t have a presence in their offices, while in telephone Yeah.