Vodafone has started talks to buy Spanish rival Másmovil with the three buyout funds that recently acquired Spain's fourth-largest operator, according to a report in El Economista newspaper.

The report said Vodafone has so far engaged in tentative talks with Lorca Telecom – a consortium comprising three private equity firms that now owns more than 86% of Másmóvil – via financial intermediaries. The value of a potential deal has been estimated at around €6 billion (US$7 billion).

El Economista cited sources close to the situation, while noting that Vodafone has refused to comment and Másmóvil indicated that there is no relationship with Vodafone with regard to corporate operations.

Reuters said that analysts were skeptical about the prospects of such a deal.

"We are highly doubtful," Jefferies said in a note. "We repeat our view that the opposite – Vodafone selling its Spanish business to a delisted Másmóvil – is much more plausible."

Certainly, Vodafone Group has tended towards offloading assets or reducing its footprint of late. It is still trying to sell its stake in Vodafone Egypt, for example, and has already exited Fiji, Malta, New Zealand and Qatar and reduced links in Australia, India and Kenya.

The Group is also planning to list Vantage Towers in Germany in 2021 as part of efforts to monetize its tower assets in Europe.

Spanish heat
Spain is certainly a hotly contested market, particularly now that it has five players after Euskaltel began a program of national expansion under the Virgin brand. Telefónica is the market leader under the Movistar brand, followed by Orange Spain and Vodafone Spain.

A merger of the third and fourth players would have a significant impact on the top two operators.

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El Economista noted that a Vodafone-Másmóvil merger would push Orange Spain into third place, while also creating a new mobile leader with a market share of 36.5%.

According to Spanish regulator CNMC, Telefónica had a 30.24% share of the Spanish mobile market in May 2020, followed by Orange with a 24.5% share, Vodafone with 22.87% and Másmóvil with 13.88%.

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— Anne Morris, contributing editor, special to Light Reading