By Clare Kane
MADRID (Reuters) - Spain's biggest telecoms operator Telefonica <TEF.MC> signed a deal with No. 4 provider Yoigo <TLSN.ST> on Thursday allowing it to use its rival's superfast mobile Internet frequencies in exchange for access to its broadband assets.
Telefonica, the only operator in Spain that does not currently provide 4G services, will have full use of Yoigo's superfast spectrum, while the smaller player will now be able to compete in the attractive market of bundling fixed-line and mobile telephone services.
The agreement is expected to come into force in the fourth quarter of the year and also includes the extension of contracts that grant Yoigo access to Telefonica's 2G and 3G networks in areas of the country where it does not have coverage until 2016, according to statements from the companies.
However, the deal drew fire from the country's No. 3 operator, Orange Spain <ORAN.PA>, which asked competition and government authorities to look into the tie-up. Spain's telecoms regulator could not immediately be reached for comment.
Telefonica and Yoigo said they had also sold mobile towers to infrastructure firm Abertis <ABE.MC> for 385 million euros ($511 million). Abertis said the deal would contribute 60 million euros to its earnings before interest, taxes, depreciation and amortisation (EBITDA).
Telefonica could not launch 4G as it did not have the right frequencies available due to a number of television channels that were using them. The company said it intends to build its own 4G network when possible.
Spain has started a process to reverse the awarding of licences for those channels.
Yoigo, a small player with 6.7 percent of the market, has successfully grown its business as cash-strapped Spaniards turn away from bigger operators in search of cheap deals.
But the company, a division of Nordic telecom operator TeliaSonera, has not been able to compete on so-called "quadplay" deals that bundle fixed line, mobile, internet and television services. Telefonica has led the way on quadplay with its Fusion package, a model other operators are using.
In a cut-throat market where over half a million people switched mobile operator in May, operators did not have to fear Yoigo poaching customers who wanted all their services in one bill. Now, Yoigo will be in a position to compete with the likes of Orange, Vodafone <VOD.L>, Jazztel <JAZ.MC> and ONO.
Orange said the fact Yoigo would have access to Telefonica's fibre optic Internet services, which offer faster speeds than competitors, discriminated against operators that cannot match these speeds.
Orange and Vodafone announced in March they would team up to build a joint fibre network and last month the pair reached a deal with Telefonica allowing reciprocal access to fibre installations in buildings.
Telefonica's O2 brand plans to launch superfast 4G mobile in London and two other British cities by the end of August, the company said in a separate statement.
(Additional reporting by Stockholm Newsroom; Editing by Mark Potter)