The European Commission has raised concerns over the proposed merger between Orange and MasMovil in Spain, stating that the deal could negatively impact competition in the country’s telecommunications market. In response, the Commission has issued a Statement of Objections to the deal, although this does not necessarily mean it will block the merger. Both telecom operators will now have the opportunity to address these objections and propose solutions.
In its statement, the Commission expressed concern that the proposed transaction might reduce the number of network operators in Spain, “eliminating a significant competitive constraint an innovative rival” in the retail markets for mobile telecommunications services, fixed internet services, and multiple-play bundles. This could lead to considerable price increases for affected retail customers across the Spanish market, even after accounting for potential cost savings.
The Commission’s statement appears to be in line with its policy on the need for four-player markets throughout Europe, which may disappoint several telecom groups that are eager to alleviate competitive pressure. In recent months, the Commission has shown support for cross-border consolidation but has been less clear about its stance on in-market M&A.
Both the involved telcos are expected to provide remedies in response to the objections. Commitments such as offering wholesale access to virtual players could help smoothen the path in Brussels. However, the Commission’s comment on the number of market players might hint at more drastic measures, such as requiring the divestment of assets to create a new fourth operator.
Italy serves as an example of this approach, where the merger that formed Wind Tre brought Iliad into the market, leading to increased competition and reduced prices for consumers. The Commission clearly appreciates this type of outcome.
It remains to be seen what steps Orange and MasMovil will take to obtain approval for their merger. Vodafone is also closely watching the situation, as the deal would make it the smallest player in both the mobile and fixed broadband markets in Spain if approved, while the company is currently contemplating its future in the country. The Commission has until 4 September to announce its final decision, which leaves ample time for market speculation in the meantime.
