The European Commission has always insisted on remedies before it will countenance granting approval for the two to merge
Orange and Másmóvil look likely to gain conditional EU antitrust approval for their Spanish merger, according to two people with direct knowledge of the matter. And it looks like Romania’s Digi Communications may have saved the deal after agreeing in December to acquire spectrum from Másmóvil and an option for a national roaming service agreement with Orange.
Digi, which operates as an MVNO in Spain on Telefonica’s networks, 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. The altnet also announced it had 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.
Orange and Másmóvil, the second and fourth-largest telecoms providers in Spain, 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
The Commission has been fixated by four-to-three operator market mergers which it stubbornly believes reduces competition, ignoring the need for scale when investing in 5G networks. Digi’s rescue mission paved the way for these concerns to be allayed. The EU competition enforcer is due to rule on the deal by 15 February. Orange Group’s CEO, Christel Heydemann (above), recently said she expected the merger to complete in the early part of 2024.
Reuters, which broke the conditional approval story, believes the move could signal a looser approach after telecoms companies urged EU antitrust regulators to ease their tough stance towards mergers that shrink the number of mobile players in a country from four to three.
London-based investment fund Zegona’s move to acquire 100% of Vodafone Spain for €5 billion was also thought to play into the EC’s decision-making on market competition in the country. At the time of this deal, CCS Insight consumer and connectivity Kester Mann said “Orange/ Másmóvil is a crucial alliance for the European telecoms sector as it could open the door to other tie-ups if approved. The Commission probably wanted some clarity on Vodafone’s long-term position in Spain before deciding, so today’s news could help that process along.”
Repeating the same mistakes
Strand Consult founder John Strand, who published a report on ‘Understanding 4 to 3 mobile mergers’ said it was “absurd” the EU keeps on using the same model when it evaluates and approves mergers. “Orange and Másmóvil are creating a player that is smaller than Telefónica, how can that be a problem?”
“Our research has revealed the folly of regulators to reject 4 to 3 mergers for reasons of competition and price, only to find that their logic was wrong and that prices increased,” he said. Strand said the EU Competition Authority’s role in the failed Telenor-Telia merger in Denmark was a case in point and led to negative consequences for Europe. He suggested if Orange and Másmóvil was not allowed to go through it would probably be a gift to Telefónica, as it was for TDC in Denmark.