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The Spanish subsidiaries of European telecom giants, Vodafone Group Plc. (VOD - Analyst Report) and Orange (ORAN - Analyst Report) have expedited the launch of their joint FTTH (Fiber to the Home) network in Spain. According to both the companies, the commercial services of the FTTH network will be available before the end of 2013 instead of the previous Mar 2014 schedule.

The joint implementation of the FTTH network has already begun in 12 cities across Spain, including Madrid, Barcelona, Malaga, Valencia and Seville. Additionally, both the companies share an agreement with rival Telefonica (TEF - Analyst Report) whereby they can connect their network with existing infrastructure of the latter installed inside buildings.

Notably, in Mar 2013, U.K. based Vodafone and France-based Orange entered into an agreement to deploy a FTTH network in 50 major cities across Spain with an investment of around $1.3 billion (€1 billion). Both parties intend to cover 800,000 houses by Mar 2014. The combined effort plans to reach 3 million premises by the end of 2015 and 6 million by Sep 2017.  

Vodafone and Orange will continue to build and maintain its own FTTH network in different parts of the country and will use the same equipment that will allow both to access each other’s network. Each company will build complementary networks and will try to restrict overlapping. The agreement is based on an open accessed model and is thus open to other operators willing to join this investment project.

Both the incumbent operators will handle the connection, delivery and service management of their own respective networks and thus will also charge different prices to their customers. Recently, both the companies also agreed to share network infrastructure in Romania.

Currently, FTTH network supports a very small part of Spain’s wireline connections and has been mainly dominated by Telefonica. But the adaptation rate of this fibre based service is gradually improving and we foresee the joint effort to not only expand the coverage area across Spain but to also create a formidable opponent to Telefonica.    

Vodafone currently carries a Zacks Rank #3 (Hold) while Orange carries a Zacks Rank #5 (Strong Sell). Another company within the sector that is worth considering is Turkcell Iletisim Hizmetleri AS (TKC - Snapshot Report). The stock currently carries a Zacks Rank #2 (Buy).

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