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Concept operation in the telecom market. After months of informal talks between Orange and MásMóvil this Saturday both operators have completed the merger of their businesses in Spain (The assets of MásMóvil in Portugal and Orange Totem’s tower operator present in the Spanish market are excluded from this transaction). a giant worth 18,700 million euros. It will be the leader in the number of customers in the Spanish market, both in broadband and mobile, although Telefónica will remain managerial (revenue, OIBDA, number of retail and wholesale accesses). They announced the foundation in a statement a “joint venture” whose capital is split 50% between the two companies with the option that both can mutually activate a public offer to sell (opv) after a defined period of time from the founding of the new company (between 24 and 42 months). An option aimed specifically at Orange, who will have the opportunity to take control of the new company. An intention indicated in various public interventions by the CEO of Orange Spain, Jean François Fallacher, indicating that they will be very active in the Spanish market in the years to come.
This movement tooa questionable competition policyas the National Commission for Markets and Competition (CNMC) may be forced to review its concept of dominant operator and decide whether to maintain the current restrictions on those previously considered market leaders in relation to Telefónica.
Both telecoms have announced their intention to return to the stock market in the medium term and that this transaction will also allow them to accelerate their investments in fiber and 5G in Spain. The agreement, signed this Saturday, values Orange at around €7.8 billion and Másmóvil (including Euskaltel acquired last year) at €10.9 billion. The two operators have estimated through various studies potential synergies of more than 450 million euros per yearfrom the fourth year after the closing of the transaction.
It was also requested a new financing of 6,600 million euros to a pool of banks to make, among other things, a payment of EUR 5,850 million to the shareholders of both telecommunications companies. The financial situation of the two companies is taken into account.
DefinitelyMásmóvil’s debts remain in the new company. Both operators have agreed to maintain a target leverage of 3.5 times net debt to Ebitda to facilitate a future IPO of the joint venture.
Regarding the power distribution within the new company, sources close to both operators have assured that there is still a long way to go and that nothing is closed in this regard. In recent months, market sources have indicated that the presidency would fall to Orange and future CEO would match Másmóvil. Specifically, the CEO of Telekom Meinrad Spenger. Nevertheless, the economic management would also fall into the hands of Orange.
Accelerated investments in fiber and 5G
For the CEO of Orange Christel Heydemann, the operation in Spain “paves the way for the creation of a joint venture combining the forces of Orange and Másmóvil in a single strong operator, enabling investments in 5G and fiber optics that will benefit customers across Spain”. The operator’s global chief acknowledges this move as “fundamental” as it is the company’s second largest market.
By Másmóvil, its CEO Meinrad Spenger has indicated that we have “a great day ahead for Spanish consumers” and has shown his confidence that together with Orange they are “forging a strong operator with a sustainable business model and the ability to invest globally in infrastructure, technology and talent». In this sense, he added that this consolidation on the Spanish market will encourage competition.
New competition policy?
Pending the green light from competition authorities, particularly from Brussels, this Saturday’s move calls into question current competition policies and could force the National Commission for Markets and Competition (CNMC) to do so Check your concept of the dominant operator and decide whether to maintain the current restrictions on the previously market leader (Telefónica). For example, anything related to the sharing of football retransmission rights with other competitors (dating back to Prisa’s acquisition of Canal Satélite Digital in 2015) or access to a certain part of the networks.
In addition, the combination of Orange and Másmóvil may open the door to possible legal remedies (‘cures’), such as compensatory payments to level out competition, from which smaller operators such as Avatel and Adamo Telecom can benefit. Both parties plan for all of this complete the merger in the second half of 2023 I eat very late. Until then, both operators will continue to operate independently.
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