The European Commission is insisting on remedies before it will countenance granting approval for the two to merge
Romania’s Digi Communications could be riding to the rescue of the proposed 50: 50 merger between Orange’s opco in Spain and Másmóvil. Digi operates as an MVNO in Spain on Telefonica’s networks.
The Romanian company has confirmed that if the merger is approved by the European Commission, it will pay €120 million to acquire 2x10MHz in the 1,800MHz band, 2x10MHz in the 2.1GHz band and 20 MHz in the 3.5GHz band. Speculation to this effect has been circulating since earlier this month.
In addition and separately, Digi has also secured the option of national roaming with Orange Spain which would give Digi Spain to access all Orange’s mobile technologies and those of its affiliates.
These commitments were formalised in a filing with Bucharest’s stock market this week.
Convoluted negotiations
Orange Spain and Másmóvil have been embroiled in convoluted negotiations with the European Commission for months in an effort to obtain approval to merge their Spanish operations a deal worth about €18.6 billion. They officially agreed to merge in July 2022.
Data from Spain’s telecoms regulator CNMC shows that Movistar (Telefonica’s brand) held a 27.56% share of the mobile market in May 2023, followed by Orange Spain with 22.14%, Vodafone Spain with 21.69%, and Masmovil with 21.01%. Hence if the merger goes ahead, the Orange/ Másmóvil combo will form the biggest mobile operator.
Commission’s collywobbles
As ever, the Commission has the collywobbles about consolidation within markets as it reduces the number of competitors. The uber regulator is particularly concerned about the possibility this could put prices while reducing consumers’ choice and hence is demanding remedies to offset these ‘threats’. Typically they take the shape of bolstering a fourth player to keep the numbers up, as in the case here.
Should the remedies prove acceptable and finally ease through the merger, it will be seen as something of a test case for the Commission which in general is agin consolidation in principle. Some, like Strand Consult, argue this prejudice has little basis in fact. Its much cited report on understanding four-to-three consolidation presents a number of cases from around the world to back its arguments.
Another factor that could have a bearing on the situation is Zegona’s intended acquisition of Vodafone Spain for €5 billion which was announced at the end of October.
Orange Group’s CEO, Christel Heydemann, recently said she expects the merger to complete in the early part of 2024.