Orange and MásMóvil are preparing their merger after obtaining the green light from Brussels

The European Commission has approved the merger of Orange and MásMóvil, creating Spain’s leading group by customers, surpassing Telefónica for the first time. Two years after the initial announcement of the agreement, on March 9, 2022, the Community Executive has approved the operation, although it is subject to the already known remedies. Both parties will become a leading operator by combining the assets, capabilities and equipment of the two companies in Spain to serve more than 7.3 million broadband customers, more than 30 million mobile services and more than 2.2 millions of television customers.

The Joint Venture will become a stronger operator with estimated revenues of more than 7.4 billion euros and an ebitdaAL of more than 2.3 billion euros, with an enterprise value of 18.6 billion and expected synergies of more than 450 million euros recurring each year (starting from the fourth year after the closing of the operation).

As part of the package of proposed remedies, the parties have agreed to transfer to Digi, 60MHz of spectrum (pending approval by the Spanish Government) and an optional national roaming agreement, as EXPANSIÓN announced on December 12.

In the words of Christel Heydemann, CEO of Orange : “Today’s announcement marks a decisive moment for the Group in Europe. Our Joint Venture proposal with MASMOVIL will create a unique, stronger and more sustainable player in Spain. By joining forces, we can have on a larger scale, we can innovate and we can drive investment in the networks of the future for the benefit of consumers and businesses.

Meinrad Spenger, CEO of MásMóvil , added: “Good things take a long time to come! We are delighted to assume a relevant role in the telecommunications sector in Spain. Our exceptional team is committed to creating a unified and differential company, capable of generating impact positive and to offer a trustworthy service to continue having the most satisfied customers in Spain”.

official statement

The EC has released a statement in which it points out that “under the protection of the EU Merger Regulation, the proposal to create a joint company between Orange and MásMóvil. The approval is conditional on full compliance with a package of commitments offered by Orange and MásMóvil.

Today’s decision follows an in-depth investigation of the proposed transaction. Orange is a full mobile network operator while MásMóvil is a hybrid mobile network operator. MásMóvil depends on its own mobile network, which does not cover the entire Spanish territory, and on a national roaming agreement with Orange to provide retail mobile services. There are two other mobile network operators active in Spain ( Telefónica and Vodafone ). There are also several mobile virtual network operators (“MVNOs”) that use the infrastructure of mobile network operators to offer mobile retail services to consumers. Digi is the largest MVNO in Spain.

The Commission’s investigation

During its in-depth investigation, the Commission collected extensive information and received comments from market participants and other interested parties. Following its investigation, the Commission was concerned that the transaction, as initially notified, would restrict competition in the retail markets for the supply of fixed and mobile Internet services in Spain, whether offered independently or in packages .

In particular, the Commission concluded that: The transaction will create the largest operator by number of customers in Spain, with a significant increase in market share in all relevant retail markets.

Orange and MásMóvil are direct competitors in the Spanish retail markets for the supply of mobile and fixed internet services. MásMóvil has been making very competitive offers and has been growing over the years. Its main brands, Yoigo and MásMóvil, have attracted a significant number of Orange customers in Spain. Therefore, the transaction would eliminate a close and important competitor. The transaction may also have caused significant price increases for consumers in Spain, well above 10%. Any efficiencies the transaction might have created, such as cost savings or incremental deployment of 5G or fiber, would not have offset the significant anti-competitive effects of the transaction.

The medicines

To address the Commission’s competition concerns , Orange and MásMóvil committed to:

Transfer spectrum held by MásMóvil to Digi in three frequency spectrum bands, two medium frequency bands (1,800 MHz and 2,100 MHz) and one high frequency band (3.5 GHz). The mobile spectrum to be sold will allow Digi to build its own mobile network and put strong competitive pressure on the joint venture; and includes an optional national roaming agreement, which Digi can decide to use or not. The possibility of using the joint venture’s network will complement Digi ‘s own network, which Digi will begin to deploy with the use of the transferred spectrum. This option is essential given that, like the current MásMóvil network, Digi ‘s future mobile network would probably not cover all of Spain. As the national roaming agreement is optional , Digi will be free to stay with its current wholesale provider ( Telefónica ) or choose another mobile network operator in Spain (i.e. the joint venture or Vodafone ).

Today’s decision also approves Digi as taking corrective action following a careful review of Digi ‘s business plan with the help of an independent advisor. Digi is a suitable buyer for the spectrum sold, as it is currently the largest and fastest growing MVNO in Spain. Digi also has experience as a mobile network operator in other EU Member States, such as Romania. Additionally, Digi has a relatively large fixed broadband (fiber) network in Spain, which it continues to build. Consequently, the commitments do not include any fixed broadband assets.

Having gathered feedback from a wide range of market participants during a market test of the proposed commitments, the Commission concluded that they fully address the competition issues identified and will preserve a competitive telecommunications market in Spain, both in terms of price and of quality, as well as in terms of deployment of the 5G network, for the benefit of consumers.

Therefore, the Commission concluded that the proposed transaction, as modified by the commitments, would no longer raise competition concerns. The decision is conditional on full compliance with the commitments. Under the supervision of the Commission , an independent administrator will oversee its implementation.”

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