What lies ahead for Orange in Spain?

Orange may well have had an "oh no" moment when Vodafone revealed it had clinched a deal to buy Spanish broadband provider Ono for €7.2 billion, subject to the usual regulatory approvals.

The purchase raises a number of questions for Orange's Spanish operations, not least with regard to its fixed-line strategy. It's still not fully clear what Orange will do about its fibre-to-the-home rollout plans. Orange and Vodafone had agreed to jointly roll out FTTH to up to 6 million homes, and initially committed to half that number between them

Vodafone has now said it will stick to 1.5 million homes after buying Ono, because it also has that company's cable network at its disposal. What's more, the operator has already revealed plans to launch commercial FTTH services in Spain on April 1 at prices starting from €54 a month including a Smart or Red mobile phone contract.

Spain is already a highly developed multi-play market: Telefonica offers so-called "quad-play" plans of fixed and mobile services under Fusion, and Vodafone Spain, Orange Spain and TeliaSonera's Yoigo also provide multi-play options. By stepping up its fibre offer, Vodafone is gaining a strong edge, and it will be incumbent on Orange to make a move soon. Pressure is growing on the operator to beef up its Spanish unit or risk being swallowed up as the market consolidates, which is widely expected to happen following years of falling revenue at Spanish mobile operators.

In a slight aside, a recent report from Analysys Mason also noted that fibre services are of greater interest to those with less to spend, even though such services are perhaps still regarded as a luxury.

"Users who can just afford superfast access are usually heavier users than those who can easily afford it," principal analyst Rupert Wood wrote in a research note.

Analysys Mason said broadband usage data shows that fibre is a value-based proposition, not a luxury, in emerging economies. Spain is not an emerging market, but millions of consumers have less money to spend than before following years of recession, and many would struggle with the affordability of LTE services and devices, for example.

At the same time, a report from comScore noted that 66 per cent of what it describes as the "digital media population" in Spain accesses the Internet from more than one device a month. This is higher than in both the UK (65 per cent) and the U.S. (58 per cent). In Spain, 12 per cent of viewers by platform also access the Internet using only a mobile phone in a month.

Orange has some thinking to do. The group's CEO Stephane Richard has recently spoken of the potential need to adjust operations in some European countries. Latest press reports also suggest the company has hired Bank of America Merrill Lynch as an adviser on its strategy in Spain, including the possible acquisition of Jazztel.

We should see Orange start to reveal a little more about its plans in the coming weeks and months.--Anne

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