The European Commission believes that the proposed merger of Spanish operators
Orange and MásMóvil may reduce competition in the mobile and fixed internet
markets.
On April 3, 2023, the European Commission opened an in-depth investigation to
assess if the proposed merger would potentially restrict competition in several market
segments including mobile telecommunications services, fixed internet access services
and multiple-play bundles.
“The Commission has conducted an investigation to understand the affected markets
and the potential impact of the transaction. This investigation included, among others,
analyzing internal documents provided by the parties and gathering views from
competitors, suppliers as well as customers,” the European Commission said. “As a result of this in-depth investigation, the Commission is concerned that the proposed transaction may reduce the number of network operators in Spain, thereby eliminating a significant competitive constraint and innovative rival in the Spanish retail markets for mobile telecommunications services, fixed internet services and multiple- play bundles. The Commission is concerned that this may lead to significant price increases for affected retail customers across the Spanish market,” it added.
Other large telcos operating in the Spanish market include Vodafone and Movistar.
The European body noted that this statement of objections is a formal step in an
investigation, where the Commission informs the companies concerned about the
objections raised against them. The European Commission explained that Orange and
MásMóvil now have the opportunity to reply to the Commission’s statement of
objections, to consult the Commission’s case file and to request an oral hearing.
The Commission was notified of the proposed transaction on February 13, 2023. The
Commission opened an in-depth investigation in April and now has until September 4
to take a final decision on the proposed transaction. MásMóvil and Orange had already announced that the operation would not close until the second half of 2023.
Orange and MásMóvil had previously claimed that the proposed merger will not mean
a reduction in the number of network operators in Spain, since there are at least eight
companies that offer fixed-mobile services in the domestic market.
In July last year, Orange and MásMóvil had signed a binding agreement to combine
their operations in Spain. The telcos had started negotiations in March 2022. The
transaction is based on an enterprise value of 18.6 billion euros (currently $20.3
billion).
Under the terms of the deal, the 50-50 joint venture stipulates that both operators will
have equal governance rights in the combined entity. The agreement also includes a
right to trigger an IPO under certain conditions for both parties after a defined period
and, in such a scenario, an option for Orange to take control of the combined entity.
The operators noted that the new entity would lead to significant efficiency gains,
allowing the combined company to accelerate investments in fiber to the home and 5G
technologies.
The companies’ due diligence process showed potential synergies in excess of 450
million euros per year to be reached by the fourth year post closing of the merger,
according to the two operators.
