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By Clare Kane and Kate Holton
MADRID/LONDON, March 13 (Reuters) - Orange and Vodafone will invest up to 1 billion euros ($1.3 billion) in ajoint fibre optic network in Spain that will bring superfastInternet to 6 million homes, the telecom rivals said onWednesday.
Both companies are struggling to compete with the fibreoptic network of Telefonica, which reaches 2.2 millionhomes, and would still need the agreement of the former Spanishmonopoly to access its connections into individual homes whichwould otherwise be extremely costly to build.
Orange, a unit of France Telecom, said it andVodafone would appeal to the telecom regulator if Telefonica didnot wish to cooperate. Telefonica said it had always beenwilling to reach agreements with other operators in Spain andother markets.
The joint venture comes after Orange said in June it wouldbuild a fibre optic network, since when it has set up a pilotscheme, although it does not yet offer ultrafast broadband tocustomers.
"The fibre optic market in Spain is very deficient in termsof competition and could end up ... a monopolised market if thisis not corrected," said Orange Spain Chief Executive Jean-MarcVignolles at a news conference in Madrid.
Vodafone has come under pressure in recent months to acquirefixed-line assets in Europe to help compete with groups likeTelefonica which offer customers "quad play" bundles of mobile,fixed-line, broadband and pay-TV.
RAPID PROGRESS
That trend has helped some operators to boost customerloyalty and increase revenues at a time when European consumers are otherwise cutting back on spending.
"The rapid progress of quad play in Spain is likely to havebrought this calculation into sharp relief," Citi analysts saidin a report, which estimated about half of Vodafone's new mobilecustomers in Spain were also buying a fixed broadband service.
"We believe that in the fourth quarter of 2012 Vodafone attimes saw approaching 50 percent of its mobile gross adds beingbundled with fixed broadband," the report said.
The Spanish plan would help Vodafone sidestep the need toacquire fixed line assets, Espirito Santo analyst Nick Brownsaid. "It negates the requirement to buy (Spanish cableoperator) Ono and they could do a similar deal in Germany, whichmay negate the requirement to buy Kabel Deutschland."
The project would consist of two complementary networks,each reaching around 3 million buildings throughout 50 cities inthe country, Orange and Vodafone said. They would be open tothird-party participation in the project.
Commercial offerings from both firms will be completelyseparate, Vodafone Spain Chief Executive Antonio Coimbra said. Vodafone and Orange also said they would guarantee mutual accessand use of the infrastructure.
Telefonica signed a deal with broadband specialist Jazztel last year to jointly roll out vertical fibre opticinstallations.
Jazztel shares were down 5 percent at 5.69 euros at 1322GMT. Telefonica shares were unchanged.
