Orange’s merger with Masmovil being investigated by EU

Orange’s merger with Masmovil being investigated by EU

Orange and Masmovil cannot yet guarantee their merger. The two companies need to address a list of competition concerns before European authorities can consider allowing the deal to go through.

Orange’s $19 billion (€17.5 billion) bid to combine its Spanish operations with Masmovil Ibercom is “under threat” from European Union competition watchdogs. The two telecom operators will have to fix a list of concerns set to be issued by the regulators.

Bloomberg has reported that the European Commission plans to issue a “statement of objections” to the two companies outlining the issues. They could consider grounds for vetoing their proposed merger.

The statement is part of the Commission’s standard process in such large scale mergers. Part of that process also includes proposals for remedying the EC’s concerns. In telecom deals, such solutions would focus on implementing solutions to ensure that the new combined network is interoperable with rivals, Bloomberg says.

Consolidation in a highly competitive market

Thanks to a large number of low-cost players, Spain is one of Europe’s most competitive telecom markets. Under Spanish law, large operators have to share their networks at regulated prices. This makes it easy for “newcomers” to move into the low-end of the market. The competition from the budget providers has caused a race to the bottom on price, according to Bloomberg.

Orange is Spain’s second largest telecom operator, behind Telefonica. Masmovil is the country’s fourth largest telco. The merger, announced in July 2022, would make them the most significant player in the market, ahead of legacy operator Telefonica.

Deal has been under investigation since April

In April, the EU competition authority launched a “Phase 2 investigation” into the merger, warning that the joint venture could reduce the number of network operators in Spain and could result in competition the restricted access of virtual operators to wholesale mobile network and wholesale fixed network access services.

Most merging companies who receive a “statement of objections” acquiesce to the Commission by resolving the competition issues. The companies also have the right to challenge the preliminary findings of regulators in writing or at a hearing.

The commission, Orange and Masmovil declined to comment, Bloomberg noted. The Commission currently has a deadline of Sept 4 to come to a final decision. However, the time frame could be extended.