Vodafone Spain is reportedly eyeing the sale of its fixed network assets for $1.3 billion (VOD)

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Vodafone Spain is reportedly eyeing the sale of its fixed network assets for €1.2 billion ($1.3 billion), according to Spanish news site Expansion cited by Telecoms.com. Per Expansion, Vodafone has provided detailed network information to potential buyers so they can design their proposals. However, Vodafone says it isn’t looking to sell anything right now, but is always analyzing all possibilities including a sale.

Here’s what it means: Vodafone’s Spanish subsidiary has been underperforming, and the company likely isn’t willing to invest additional capital to boost its performance. 

Vodafone Spain has fallen on hard times. In the quarter ended June 30, 2019, the operator’s service revenue dropped 9% year-over-year (YoY) to €988 million ($1.1 billion) from €1.1 billion ($1.2 billion) — the second consecutive quarter the unit experienced a 9% YoY drop. In addition to its financial losses, Vodafone Spain also lost two corporate accounts in the quarter, 158,000 postpaid mobile subscribers, 49,000 fixed broadband customers, and 24,000 TV customers.

The company has already forged a network sharing deal to avoid costly build-outs. Vodafone and Orange signed a mobile and fixed network sharing agreement in Spain in April 2019, with the main aim of enabling a faster and wider 5G deployment. Under the deal, Vodafone can offer its customers broadband and other fixed services on Orange’s fiber-to-the-home (FTTH) network.

Vodafone Spain expects the capital expenditure savings from the deal to amount to at least €600 million ($659 million) over the next 10 years. Given this agreement, Vodafone likely wants to hold off on pouring more capital into its fixed networks, and instead might see selling its assets to a rival as the most prudent move. Vodafone could sell the division to avoid the expenses associated with upgrading and expanding its fixed network infrastructure, and instead focus on building out other areas, such as mobile 5G. 

The bigger picture: Vodafone will need to concentrate its 5G efforts on select regions, or it could risk spreading itself too thin.

The sale of Vodafone Spain’s fixed assets could help offset the costs of building out 5G. The process of upgrading network infrastructure to enable 5G is expensive. Vodafone may sell its fixed assets to offset its investment in fixed 5G, a longer-term play to prepare for widespread 5G adoption. 

Additionally, the proceeds can allow parent company Vodafone to focus on higher-profit projects in central Europe — an area it’s currently emphasizing. In July 2019, Vodafone closed an €18 billion ($20 billion) deal to acquire Liberty Global’s cable networks in Germany and central Europe.

This massive deal shows that Vodafone has its sights trained on expanding its presence in other parts of Europe. In Germany, Vodafone’s capital expenditure was €1.8 billion ($2 billion) for the fiscal year ended March 31, 2019, up from €1.7 billion ($1.9 billion) the year prior — in Spain, its spending decreased from €863 million ($948 million) to €813 million ($893 million), another sign that Spain is not a top priority for the company.

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