Spain’s economy minister has spoken in favour of consolidating the telecom market as regulators investigate the proposed merger between two of the country’s large carriers, Orange SA and Masmovil Ibercom SA.

“Competition policy has to adapt to the changes that are taking place in the market”, economy minister Nadia Calviño said. “The current competition structure has nothing to do with that of the past. Traditional telecommunications operators, such as large digital platforms, are subject to increasing competition from new entrants.”

The European Commission is expected to give its opinion on the merger of Orange SA and Masmovil in 2023. If finalized, the deal will create an enterprise with a combined value of about €18.6 billion ($19.9 billion) and become the country’s largest carrier.

Commission scrutiny

The European Commission has opposed various big mergers in recent years. The executive arm made a notable decision in 2016 by blocking CK Hutchison’s attempt to acquire Telefonica SA’s O2 UK. It was the Commission’s first-ever veto of a mobile tie-up.

Regulators argued that the Hutchison-O2 decision was due to price and investment pledges failing to address the watchdogs’ concerns.

The veto didn’t hold

In 2020, a European Court ruling overturned the veto. Although the decision came too late for the deal, it signalled that the bloc would be more open to large mergers in the future. The industry has a long-held belief that the European market is too fragmented, with too many operators.

For the industry, mergers serve to increase profitability. In addition, major telecom players point to competition from tech platforms like WhatsApp, which are widely used to make calls and send messages.

It’s worth mentioning that Calviño served as the assistant director general for competition at the European Commission between 2006 and 2010.

Tip: Europe’s top countries want clarity on big tech network costs