Spanish consolidation appears likely - but only two can tango Spanish consolidation hopes have seen TEF, VOD and Orange outperform significantly in recent months. But whilst all players are jostling to be part of a deal, it is MasMovil that holds most of the cards, and is likely to reap the majority of the EUR4bn in synergies on offer. We believe that a MasMovil/Vodafone combination remains most likely, with MasMovil the likely acquirer and the majority of savings driven by the decommissioning of Vodafone''s cable network in Spain (raising bigger questions for VOD''s strategy in Germany/Netherlands). Both TEF and Orange stand to lose significant wholesale revenues, and we remain sceptical on any prospect of ''market repair''. Vodafone (+) is under most pressure to do a deal, and MasMovil is the most likely acquirer The revenue outlook for Spain remains one of the worst in Europe, and it is no surprise that management teams are looking to market consolidation as a panacea. A full range of deal structures (VOD-MAS, ORA-MAS, VOD-ORA) have been speculated in recent weeks, and Vodafone appears to be under most pressure to negotiate as market share continues to fall and customers drain away from the cable network towards FTTH. We believe that Vodafone''s best option is to either decommission the legacy cable network or fully upgrade to FTTH (as MasMovil is doing with Euskaltel), and accept wholesaler status in Spain. Doing this as part of a deal with MasMovil could unlock EUR4bn of synergies, worth 6p/ share for VOD and providing an exit route from one of the group''s most challenging markets. But there is also potential for an Orange-MasMovil combination which would leave Vodafone stranded in a tough market. Whilst Vodafone are rightly holding out for a higher price, they should also be careful not to overplay their hand. Risk is skewed to the downside for both Telefonica (-) and Orange (=) Most consolidation scenarios would see TEF and Orange lose...