The chances of The European Commission approving the merger between Orange and MasMovil seem unlikely as they declare the proposal could harm competition.
As sources had rumoured, the Commission have published a Statement of Objections to the merge deal. While this doesn’t completely deny the merger, or mean that the Commission will move to block it, it’ll be very difficult to reason with. Orange and MasMovil now have their chance to address the objections in the statement and to propose remedies for them. Despite this, it’ll be a horribly uncomfortable task trying to get an ease of the competition policy when it comes to telecoms M&A in Europe.
”The Commission is concerned that the proposed transaction may reduce the number of network operators in Spain, thereby eliminating a significant competitive constraint and innovative rival in the Spanish retail markets for mobile telecommunications services, fixed internet services and multiple-play bundles (including fixed mobile convergent ones).”
“The Commission is concerned that this may lead to significant price increases for affected retail customers across the Spanish market. Predicted anticompetitive effects are substantial even after taking potential cost savings into account, in a context where competition has been a driving force for investment and quality of services in the Spanish market,”
Statement from The European Commission
The Commission seems to be standing its ground on the opinions of four-player markets across Europe, which will most likely be a disappointment to various telecoms groups looking to ease out some of the competitive pressure on them. The Commission did clarify earlier this year that it is in favour of cross-border consolidation, but has been less open about its views on in-market M&A. With this in mind, its most likely this merger deal is being used as an example for future policy.
The telcos, without a doubt, will have remedies to combat the statement. They likely saw the Statement of Objections coming. The Commission had already voiced concerns about the loss of a facilities-based player when it looked into the merger deal in April.
Commitments over providing access to wholesale for virtual players and other similar remedies will likely go towards smoothing the path for Orange and MasMovil. The Commission showing concern for the number of market players, however, suggests that it may go quite as far as to demand the hiving off of assets to create a new, fourth, operator. This isn’t an uncommon method of protecting competition. It’s been seen notably before in Italy, where the merge creating Wind Tre let Iliad in to disrupt the market in a more price-sensitive way.
While it isn’t great news for the telcos, it’s great for the Commission, as it lowers prices down for consumers.
It’ll take some time before we get to see just what Orange and MasMovil are willing to do to push this merger through. As well as this, it’ll be interesting to see what Vodafone do, becoming the smallest player in both fixed broadband and mobile markets in Spain if the deal is approved, but is simultaneously considering selling out.
The Commission has a deadline of the 4th of September to finally publish its final decision on the merger. That allows for plenty of time for the two telcos to consider their arguments and remedies.