Spain's $5B Telecom Breakup? Telefonica and Masorange Plot Bold Move on Vodafone

Khac Phu Nguyen

Fri, Jun 6, 2025, 2:37 PM 1 min read

Telefonica (NYSE:TEF) and Masorange have kicked off informal discussions about a potential deal for Vodafone Spain, according to people familiar with the matter. While nothing is on paper yet, insiders say one idea being explored involves splitting up Vodafone Spain's fixed-line and mobile or enterprise operationspossibly to dodge antitrust objections. Masorange could also take over the Lowi brand, Vodafone's low-cost unit. The backdrop? Pressure is mounting in Spain's crowded telecom market, and consolidation is starting to look like the only way out.

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Masorange, formed in 2024 from the 18.6 billion merger between Masmovil and Orange's local business, is now the country's biggest operator by customer base. Vodafone Spain, meanwhile, was acquired by Zegona for 5 billion last year but has continued to strugglepartly due to an aging fiber-optic network. It's already working with Masorange on a fiber venture, but a broader breakup-and-buyout could redraw Spain's telecom map. Telefonica still dominates business services, but Chairman Marc Murtra has made it clear: Europe's telecom players need to bulk up or risk getting left behind.

But even if the strategic logic lines up, execution won't be easy. Telefonica's credit rating is hanging at the edge of investment-grade, leaving little room for risky moves. Murtra has said he won't jeopardize that rating, though some sources say creative funding structures might still be possible. A throwback to the 2020 Brazil playbookwhere Telefonica and two rivals jointly carved up Oi SAcould help navigate regulatory obstacles. For now, there's no formal proposal, but if talks progress, this could become one of the boldest moves in European telecom in years.

This article first appeared on GuruFocus.