Orange-MásMóvil merger ‘approved with very good remedy’, says EU’s Vestager

9 months ago 33

The European Commission accepted on Tuesday (20 February) the €18.6 billion deal between Orange and MásMóvil in Spain, provided that spectrum bandwidths are divested to the Romanian mobile operator Digi.

Subject to an inquiry under the EU merger regulation, the creation of a joint venture was considered a test for whether the Commission would maintain its competition doctrine in telecom markets.

No four-to-three mobile mergers have been allowed since Competition Commissioner Margrethe Vestager took office, although she denies that there is a “magic number” of mobile competitors per member state.

“Orange and MásMóvil’s joint venture threatened competition in the retail supply of mobile and fixed internet services in Spain. But the commitments offered by the parties will enable Digi, the largest and fastest-growing mobile virtual network operator in Spain, to replicate the strong competitive pressure exerted by MásMóvil,” Vestager said on Tuesday.

Orange and MásMóvil will form an equally controlled joint-venture controlled with equal governance rights. The entity will be the leading Spanish operator.

Yet, this is precisely what the Commission feared.

The EU executive considered that the joint venture would restrict competition and dominate the other competitors, Telefónica and Vodafone.

Eventually, the Commission also feared that the joint venture would lead to a price increase of over 10% for Spanish consumers.

The EU executive therefore suggested remedies in June to ensure a level playing field in the Spanish telecom market.

Orange and MásMóvil agreed and committed to selling specific spectrum bandwidths to Romanian mobile virtual network operator Digi. In doing so, the Commission hopes that Digi will exert sufficient competitive pressure on the joint venture to preserve consumer welfare.

Digi Communications was founded in Bucharest in 2000 and is present in Romania, Spain, Italy, and Portugal. It is well known for its aggressive pricing.

Consolidation debate

The joint venture should be finalised by the end of March. According to Orange, this new entity will have the scale it needs to invest in 5G and fiber.

Orange’s CEO Christel Heydemann welcomed the announcement saying that “by joining forces, we can scale, we can innovate and we can drive investment”.

Heydemann’s comment is in line with the mobile industry’s claim that there is a need for consolidation in the EU if the Commission wants to achieve its 2030 digital decade targets.

Indeed, according to the plan, 5G and fiber technologies should be available for all EU citizens by 2030, an objective that will cost around €200 billion, according to Commission estimates.

Vestager stated again on Wednesday (21 February) that she was in favour of consolidation, providing that it was cross-border and not in one market.

She moreover highlighted that the Orange-MásMóvil deal was “approved with a very good remedy,” the presence of Romanian Digi.

According to Vestager, there is a need to achieve a true EU single market in telecommunications, which can deal with regulatory burden and market fragmentation, and bring about more spectrum harmonisation.

To this end, she and Single Market Commissioner Thierry Breton launched a consultation on the future of connectivity, open until 30 June 2024.

The need for updated regulation is dire, they said, as this is the baseline for the future digital economy.

As Breton wrapped it: “There will be no competitiveness [in Europe] if there are no infrastructures that allow us to achieve it and reap the benefits of the digital transition”.