Brussels approves with circumstances the merger between Orange and MásMóvil | Economy | EUROtoday

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Headquarters of the MásMovil group in Spain.Eduardo Parra (Europa Press)

The European Commission already has a verdict for the merger between Orange and MásMóvil within the Spanish market: it will possibly proceed, however in alternate for them agreeing to surrender a part of their enterprise to the rival operator Digi. Despite this, the ensuing firm “will become the largest company by number of clients” in Spain, in line with the assertion launched by the European Executive to announce its determination. Brussels' determination can have happy the headquarters of the telecommunications operators in Spain, each the businesses immediately affected (Orange, MásMóvil and Digi) and their principal rivals (Telefónica and Vodafone), which defended this merger as essential to “consolidate the sector”, that is, reduce competitors.

The preliminary examination carried out by the powerful Competition Directorate-General of the European Commission had concluded that the unconditional purchase of MásMóvil by the French giant Orange “may reduce competition” and end up “giving rise to large price increases.” This led the community Executive to open an in-depth evaluation of the operation. It was in this part of the process, specifically last December, when the two companies approached Brussels about selling part of their business to allow them to move forward with their plans.

The conditions imposed by the Executive are based on this proposal, previously agreed upon with the Romanian operator Digi. This agreement consists of the transfer of several frequency bands for 120 million. Competition has picked up the gauntlet and forces Orange – the big fish that eats the small one – to sell Digi two medium frequency bands and one high frequency, which will allow the Romanian company to create its own telecommunications network, and give it access to its own network, something that the beneficiary firm may or may not use, as it considers. Until now this company did not have a network, so it rented it to Telefonica for 300 million. This explains why Digi, along with the two companies involved in the operation, can be considered one of the major beneficiaries of Brussels' decision. The Romanian company, currently, the one that is growing the most in the Spanish market both in revenue and in subscribers thanks to its rates low cost.

“This favorable decision takes into account the specificities of the highly competitive Spanish market and includes balanced compensation for an existing operator,” Orange and MásMóvil celebrated in the joint statement they issued shortly after the Commission made its decision public. . The companies now plan to accelerate the operation since they announce that they want to “complete the operation by the end of the first quarter of 2024,” or in other words, in 40 days. They will already be the last steps of a process that was launched in March 2022, when there was an agreement in principle between the two corporations. The final conditions of the merger were closed months later, in July of that year, which included the distribution of a superdividend of 5,850 million euros between the shareholders of the two companies, mainly the British fund Lorca on behalf of MásMóvil and the French State in the case of Orange, and, consequently, an increase in debt above 12,000 million.

The European Commission itself assumes that, by allowing the merger, the resulting company will become the first in Spain by number of clients, with which Telefónica will lose for the first time in history in the year it celebrates a century of existence. The combined entity, which will be articulated through a joint venturewill have revenues of about 7,400 million and an Ebitda – profits before taxes and asset amortization – of about 2,300 million, according to calculations by Orange and MásMóvil, which put the value of the resulting company at 18,600 million.

For observers of corporate operations in the EU and the policy followed by Brussels, this was an interesting operation with which it was possible to observe the extent to which Competition was opening up to the existence of national or continental champions. However, the result could be considered unclear. On the one hand, it gives the green light to the operation as demanded by the major players in the Spanish and European market (Orange, Telefonica, Vodafone). On the other hand, the conditions that have emerged during the in-depth examination of the operation have ended up giving Digi access to assets, especially mobile networks, which it would have been difficult to access otherwise and which may give rise to creation of a fourth major operator in the Spanish market, a position until now occupied by MásMóvil. With these resources, the Romanian firm now gains bargaining power against Telefónica, its network provider, to reduce the price it pays, or opt for another provider such as the company resulting from the merger or Vodafone.

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