Close on the heels of signing a deal to buy Spain’s largest cable operator Ono, Vodafone Group plc (VOD - Analyst Report), announced that it will commercially start offering fiber-to-the-home (FTTH) service in the country from April.
Vodafone’s partnership with Orange (ORAN - Analyst Report) has a large part to play in the rollout of fiber broadband in Spain. The British telecom major will launch the service in several areas of Barcelona, Madrid, Seville, Malaga Valencia and Zaragoza initially using the FTTH network it has built with Orange.
Subscribers can select from two different fiber plans offering download speed of 100MB/sec or 200MB/sec. They can also opt for a bundled plan, which comes with 66 MB of mobile data, 200 minutes of voice calls, free wireline calls to peer landlines and a download/upload speed of 100MB/10MB respectively.
Notably, last year, Vodafone and Orange agreed to invest nearly €1 billion or $1.3 billion for the FTTH network program. Both companies will have access to each other’s broadband lines that will be laid out based on the same technical specifications. This will enable the total infrastructure to function as a single network.
To further strengthen its fiber optic network, both Vodafone and Orange inked a deal with rival Telefonica (TEF - Analyst Report) in Jul 2013, to use the network of the latter to deploy faster broadband service for its customers. However, Vodafone has to catch up to rival Telefonica, which is a clear leader in the Spanish market with its widespread fiber optic network.
But Vodafone is not solely relying on the new FTTH network to provide the high speed broadband service. Recently, the company reached a deal to buy Madrid-based Ono for €7.2 billion (approximately $10 billion), which has 1.9 million customers in Spain covering 70% of the population and can offer broadband speeds of up to 200 MB/sec.
We believe the new FTTH network together with the Ono deal will save Vodafone’s expansion cost along with reducing line renting from Telefonica.
Vodafone currently carries a Zacks Rank #3 (Hold). A better-ranked stock worth considering within this sector is SK Telecom Co Ltd (SKM - Analyst Report).