Brussels approves merger of Orange and MásMóvil in exchange for sale of Digi assets

Green light for the merger of Orange and Más Móvil in Spain. The procedure, which took almost a year, received approval from the European Commission on Tuesday. Brussels approves the operation subject to a number of conditions that both operators have agreed to in order to guarantee free competition in the Spanish telecommunications market. These commitments were part of an investigation process launched by local specialists several months ago.

The problems that Brussels faced in the €18.6 billion merger process were related to the significant increase in market share in the hands of the two operators compared to other competitors in the field of mobile phone and internet services such as Vodafone or Movistar. There were also concerns about rising prices (more than 10%) for consumers in Spain, as well as anti-competitive implications, despite the fact that cost savings or wider deployment of fiber or 5G were a priori advantages.

The decision comes after Orange and MásMóvil reached an agreement in December with Romanian company Digi, which acquired part of MásMóvil’s radio spectrum for €120 million. They also announced an agreement to use the new operator’s networks. “The transferred mobile spectrum will allow Digi to build its own mobile network and put strong competitive pressure on the joint venture,” Brussels said in a statement.

Another commitment made by Brussels is related to the contract under which Orange gives Digi España the opportunity to enter into a national roaming contract in the future for the provision of certain mobile electronic communications services, which will allow Digi España to have access to all technologies available on the Orange Espagne SAU mobile network or its subsidiaries, including MasMovil Ibercom SAU in Spain.

“As the national roaming agreement is optional, Digi will be able to remain with its current wholesale provider (Telefónica) or choose another mobile network operator in Spain (eg a joint venture or Vodafone),” explains the European Commission.

So what now?

The new joint venture will hit its biggest roadblock on Tuesday following the announcement of the two companies’ merger. The great scope of the union of these companies, which was born with a 50% distribution between the partners, required that it depend not only on the Spanish authorities, but also on the European ones. In fact, almost the entire sector was counting on Brussels’ decision regarding this merger, since in the past it was more restrictive in terms of concentration in the telecommunications sector.

For now, they will continue to operate as two independent companies. The latest details are not yet available, although sources close to the operation note that, with Brussels’ approval, the most difficult part has already been completed. Among the final decisions on which this process depends is the approval of the Spanish government.

During this year, as the European Commission’s antitrust investigation was extended, both companies advanced the process of at least developing what would become the main telecommunications operator in Spain in areas such as telephony. , mobile phone or internet at home. That’s why the process is now expected to be quick, with the goal being for it to be closed within the next month, both companies said in a joint statement following Brussels’ decision.

The operation received approval from Brussels days after the CNMC, Spain’s competition authority, approved the unconditional sale of Vodafone Spain to Zegona. However, in the coming months, important changes in Spain’s telecoms landscape will be accelerated by the loss of profitability that two European giants, such as Vodafone and Spain, have been enjoying due to price pressure from smaller operators. Added to this are changes in the shareholding of Telefónica, which Saudi Arabia has entered through its state telecommunications company and where the Spanish public sector is expected to enter through Sepi.

On the other hand, this operation confirms that Digi is a candidate to be the only operator capable of competing with the three large companies that will now control more than 90% of the sector’s main enterprises. The Romanian company has been increasing its market share in recent years, and with the sale of MásMóvil, which includes the terms of the merger approved this Wednesday, it will increase. Thus, it will be the fourth operator in the country.

The new company was born from a 50/50 distribution of the group’s shares between the funds that own MásMóvil (KKR, Cinven and Providence) and Orange. This will continue to be the case in the coming months during the period of stability that was agreed upon when the operation was announced. After this time, the French company will be able to take control of the company. The company’s goal is to preserve the brands of these two groups, although the joint name they will give the company has yet to be clarified.