The Government authorizes the merger of Orange and MásMóvil, which hope to function as one firm earlier than the top of the month | Companies | EUROtoday

Absolute change within the Spanish telecommunications sector. The council of ministers has given approval to the merger of Orange and MásMóvil, after the Government has approved the operation from the perspective of the regulation referring to international investments, and likewise the radio spectrum settlement reached by the 2 firms with Digi and that facilitated the authorization of the European Commission a couple of days in the past, virtually two years after the preliminary announcement between each firms

“Today the Council of Ministers approved the merger of equals for the combination of their businesses in Spain of two operators in the telecommunications sector, Orange and Masmóvil. This merger results in the first operator in Spain, with more than 30 million mobile customers, with more than seven million fixed broadband customers and more than two million television service customers,” said the owner. of the portfolio for Digital Transformation and Public Function, José Luis Escrivá.

“The approval of this merger is accompanied by an industrial plan of the resulting entity that is truly ambitious and with a very medium-term orientation, with a very powerful investment policy over the coming years in fixed and mobile digital infrastructures,” he added. Escrivá on the press convention after the council of ministers.

The operation, valued at around 18.6 billion euros and which will create a leading company in the Spanish telecommunications market by number of clients and fixed-line and mobile phone coverage, already received approval from the Commission on February 20. European.

After the authorization of the Executive, it is expected that the pending administrative and legal procedures to close the operation definitively will be concluded in a couple of weeks, so the deadlines contemplated by both companies, which hope to complete the transaction in the first quarter, will be met. of the year. The intention of both partners is to sign the contracts before the end of the month, to begin operating as a single company.

One of the first steps will be the establishment of the joint board of directors, where Orange and MásMóvil will have the same number of representatives, presumably four. Of the directors of MásMóvil, at least three will correspond to its main shareholders, KKR, Cinven and Providence. This management body will be key in defining the strategy.

The board will be chaired by Jean-François Fallacher, current president of the board of Orange Spain and CEO of Orange France, who will become the group's strong man in the Spanish market, the second in income contribution of the operator. In turn, Meinrad Spenger, current CEO of MásMóvil, will take on the position of top executive of the company. joint venture.

Next, and quickly, the company will establish its new leadership with its organizational chart. Among other positions, Ludovic Pech, CEO of Orange Spain, will occupy the position of financial director of the new operator.

The integration will unlock the financial agreements signed between both parties. In the initial announcement, Orange and MásMóvil explained that the merger was supported by a debt of 6.6 billion euros without recourse to the shareholder, provided by a syndicate of national and international banks.

These funds will be used, to a large extent, to pay a dividend of 5,850 million to the shareholders of Orange and MásMóvil. Of these, the French telecom company will receive around 4.2 billion euros, given that, in the merger, its Spanish subsidiary, which was debt-free, contributed. The rest, around 1,650 million, will be distributed to MásMóvil shareholders. However, the exact amount could vary slightly with the final closing of the transaction.

The agreements between Orange and MásMóvil contemplate the IPO of the joint venture. In this way, the two partners will have the right to activate a Public Offer for Sale (IPO) under certain conditions agreed upon by both parties after a period between 24 and 42 months after the closing of the transaction. That is, under these terms, the company's debut in the financial markets will not be before March 2024.

Under the signed agreements, Orange will have the option to take control of the new combined entity at the price of said IPO. The French group has expressed on different occasions its intention to remain as the industrial partner of the new company.

MásMóvil's current debt will remain in the new company. Both parties, however, agreed on a financial policy that contemplates achieving a leverage target of 3.5 times the EBITDA, compared to five times at the closing of the merger, including synergies, to facilitate the aforementioned IPO.

In this sense, Orange and MásMóvil established a synergy potential of more than 450 million euros annually, starting in the fourth year after the closing of the operation. Of these, nearly 230 million correspond to network synergies, including joint deployments, rationalization of mobile sites, sale of radio spectrum, optimization of wholesale and transmission contracts, along with other indirect cost savings; and another 160 million to sales, marketing and customer service.

The aforementioned agreement with Digi includes the sale of spectrum from the former Yoigo, for an amount close to 120 million euros, along with the option of a roaming national for the Romanian operator.

Orange shares registered slight declines after midday. Since the beginning of the year, they have appreciated 2.5%. The group currently capitalizes just over 28.1 billion euros.

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