In just 19 days it will be two years since Orange and MásMóvil announced the decision to merge, and until yesterday they did not receive the approval of the European Union Competition authorities to be able to take this step.
Two years of intense negotiations, a bit of bureaucracy and a large dose of forward-looking strategy have ended in a merger with conditions that the stakeholders did not want, but which are looser than most of the sector could have expected at that 9 of March 2022, when the merger was announced.
The operation is still pending the formalities of being approved by the Spanish authorities, presumably before the end of this quarter. Until then, the two companies will continue to operate independently. Later, their union will give rise to the first Spanish telecommunications operator. In this way, Orange and MásMóvil will provide service to 7.3 million broadband customers, more than 30 million mobile services and more than 2.2 million television customers. It will be the first time in history that a company surpasses Telefónica in terms of volume, although the company led by José María Álvarez-Pallete will still retain the leadership in turnover.
The merger agreement gives the new company a value of 18,600 million euros, and provides an estimated revenue of 7,400 million euros and an operating result before taxes of more than 2,300 million euros. The synergies derived from the merger will amount to more than 450 million euros a year from the fourth year after the closing of the operation.
A business volume that, from the first moment, raised suspicions in Brussels due to the impact it could infringe on the competition of the sector in Spain, since a possible price increase of up to 10% was calculated . To avoid this, after examining all the details of the operation during the last year, yesterday he gave the final approval in exchange for the new company to cede to the operator of Romanian origin Digi 60 megahertz (MHz) of mobile frequency divided between the three bands of 1,800 MHz, 2,100 MHz and 3,500 GHz. Digi will pay 120 million euros in return, which also entitles it to preferential use of the wholesale network.
Competencia has rated Digi as the "suitable buyer for the sold spectrum" for being the largest, the fastest growing, for its presence in other countries of the European Union and for deploying its own fiber network for which has not obtained any additional rights. With the assigned frequencies, Digi will be able to deploy its own mobile network and, therefore, continue its policy of low prices by putting pressure on the new operator", says the note issued by the Commission.
For his part, the CEO of Orange Spain, Ludovic Pech, explained last week during the presentation of the company's results that Orange will make use of its right to take control of the new company and has provided in its count the extraordinary dividend of 4,200 million to buy 1% of the shares, so that it will break the initial parity agreed that each of the two operators would own 50% of the shares of the new company.
The ordinary dividend of the new company will be divided into 4,200 million for the French shareholders and 1,650 million for the shareholders of MásMóvil, mainly the funds KKR, Cinven and Providence.
But the merger between Orange and MásMóvil transcends those involved. As Brussels has wanted, the transfer of spectrum to Digi gives it room to corner its competitors even more in the race to attract customers through prices in Spain. "But the fact that it has not been stricter with the transfer of assets is a radical change in Competition policy. It sends a signal to the rest of the European countries, which were waiting for its decision, that Brussels considers that stronger operators with the capacity to invest in new technology are needed and is ready to allow it", point out sources in the sector. At stake is 5G, but also all the bets for the infrastructures necessary to assimilate artificial intelligence.
"That's why we need something more than mergers, we need a total change in the management strategy of telecommunications companies, a commitment to externalize non-strategic activities, sell fiber infrastructure as they have done with the towers and focus is in the efficient management of clients", points out César Cid, Accenture's head of communication, media and technology in Spain and Portugal.
