Spain's fourth operator has upped its profit expectations after extending an agreement with Orange to cover the use of its 5G networks.
Spain's Másmóvil is guiding for higher profits than it previously expected after extending the terms of a wholesale agreement with rival Orange to include 5G services as well as 4G and fiber access.
Másmóvil now expects earnings (before interest, tax, depreciation and amortization) of €465 million ($507 million) this year, an increase of €15 million ($16 million) on the previous guidance, and €570-600 million ($621-654 million) in 2020, up €40-50 million ($44-55 million) on earlier estimates. It has also now issued guidance for 2021, when it expects to make €670-700 million ($730-763 million) in EBITDA.
The operator's share price soared in the wake of the announcement and was trading up more than 17% in Madrid this afternoon at the time of publication.
The new deal with Orange will guarantee access to a 5G network covering 35% of the population, including parts of Spain's 40 largest cities, said Másmóvil.
On the fixed-line side, it will gain access to another 5.2 million homes served by Orange's fiber network, extending its reach to 13 million homes by the end of this year and 14.2 million homes in 2020.
Másmóvil said it would be able to realize cost savings of about €30 million ($33 million) next year and €40 million ($44 million) annually starting in 2021 thanks to the latest agreement.
The arrangement should help to free up funds for investment in the company's own networks and Másmóvil is now guiding for overall capital expenditure of €457 million ($498 million) this year, after spending €408 million ($445 million) in 2018.
"This new agreement will allow us to finalize the development of a unique model in Europe for the construction of our own high-speed networks of the fourth operator in the most efficient possible way," said Meinrad Spenger, Másmóvil's CEO, in a prepared statement. "In addition, together with the good commercial and financial progress recorded by Másmóvil in the first half of the year, we have substantially improved our guidance."
A spokesperson for Orange confirmed the deal is a straightforward extension of an existing wholesale agreement and said there were no plans to share network equipment with Másmóvil as Orange does with Vodafone in the Spanish telecom market.
Under that tie-up, Orange and Vodafone have said they will share "active" network equipment, including 5G gear, in any city with a population of fewer than 175,000 people.
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However, while Vodafone already claims to have launched 5G services in Spain, Orange does not plan to introduce a commercial 5G offer until late 2020.
During last week's 5G Core Summit in Madrid, Tomas Alonso, Orange Spain's head of product engineering, complained that 5G equipment remained too heavy and too power-hungry and that mass-market 5G devices were still in short supply.
He is also unhappy about the current 5G spectrum situation. "In almost all cases, the spectrum is allocated in different packets," he said. "We need to do some shuffling to have contiguous bands so that we can provide the best experience in 5G."
Playing a challenger role, Másmóvil has continued to exert pressure on bigger Spanish rivals and last year reported a 12% increase in reported revenues, to €1.45 billion ($1.58 billion), and a 40% rise in adjusted net income, to €135 million ($147 million).
But its net debt has grown sharply over that period, from just €265 million ($289 million) in 2017 to €770 million ($839 million) last year. The 2018 figure is equal to about 2.3 times adjusted EBITDA, up from a ratio of just 1.1 in 2017.
Másmóvil last year secured 80MHz of 5G-suitable spectrum in the 3.5GHz band through private deals.
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— Iain Morris, International Editor, Light Reading
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