By Leila Abboud and Gwénaëlle Barzic
PARIS (Reuters) - Orange (PA:ORAN) has begun talks with several potential buyers for parts of Jazztel's (MC:JAZ) fiber network, which it has agreed to sell to get regulatory approval for the takeover of the Spanish broadband company.
Nicolas Laederich, an executive who handles regulatory affairs and competition issues for the French telecoms group, said the divestment would be paired with a promise to rent out capacity on the company's fixed network to whoever buys the fiber assets.
European regulators have asked Orange to make these concessions as a condition of approving the 3.4 billion euro ($3.80 billion) deal to acquire Spanish broadband company Jazztel.
The arrangement would bring back a fourth national competitor to Spain's broadband market.
Sources told Reuters last Thursday that European regulators would approve Orange's takeover of Jazztel. The deadline for a decision is June 1.
Orange clinched the Jazztel deal in September to keep up with Spain's leader Telefonica (MC:TEF) and Vodafone (L:VOD), which were both already present in mobile and fixed services. Vodafone bought national cable operator Ono several months before Orange moved for Jazztel.
Spanish customers are flocking to buy discounted bundles of fixed and mobile services, and Spain is now Orange's second most important market in terms of revenue and sales, after its home country of France.
Laederich said Orange would sell about 720,000 fiber connections that Jazztel had installed in five cities including Madrid, Barcelona and Valencia. The company that buys the fiber assets will also have the right to piggyback on Orange-Jazztel's fixed network via a wholesale agreement so as to be able offer broadband nationally.
"We have already had contacts with several interested parties," the executive said by telephone, declining to give specifics.
"These remedies in no way undermine the attractiveness of the Jazztel acquisition for Orange."
About 60 percent of the fiber connections overlap with Orange's own network, he explained, and the goal of generating 1.3 billion euros in cost savings from the Jazztel deal remains.
Potential buyers for the fiber assets could include budget mobile carrier Yoigo, which is owned by Sweden's Teliasonera (ST:TLSN), or regional cable companies such as Euskaltel and R, which are both owned by private equity funds. Small mobile company Masmovil (MC:MASM), which already rents capacity on Orange's network, could also be a good fit.
Shares of Orange closed 4.7 percent lower at 14.21 euros on Tuesday, compared with a 2.1 percent drop in France's blue-chip index (FCHI).