The European Commission has given the green light, within the framework of the EU Regulation on EU Merger Regulation to the proposal to create a joint venture between Orange and MásMóvil. However, approval is conditional on full compliance with a package of commitments offered by Orange and MásMóvil.
Today’s decision follows a thorough investigation into the transaction.
Understanding why is easy: Orange is a mobile network operator, while MásMóvil it’s a “hybrid” mobile network operator (definition of the Commission, ed) which does not cover the entire national territory given that – in areas where it does not have its own signal – it goes in national roaming on the orange network. For Italian friends, the calls for the merger between WIND and 3 Italia are clear.
That said, in the Spanish market, there are also two other mobile network operators, Telefónica and Vodafone, as well as several virtual mobile network operators (‘MVNOs’) that use the mobile network operators’ infrastructure to offer retail mobile services to consumers. Between these Digi – also present in Italy, ed. – is the largest MVNO in Spain.
The Commission’s investigation
During its in-depth investigation, the Commission gathered extensive information and received feedback from so-called stakeholder.
The Commission feared that the transaction, at least as initially notified, could have limited competition in the market.
In particular, the Commission found that:
The transaction will create the largest operator by number of customers in Spain, with a significant increase in market share in all relevant retail markets. Orange and MásMóvil are direct competitors for the provision of mobile and fixed internet services. MásMóvil has very competitive offerings and has grown steadily over the years so much so that its brands, Yoigo and MásMóvil, have attracted a significant number of Orange customers in Spain. The transaction could have led to significant price increases for consumers in Spain, well over 10%. Any efficiencies that the transaction might have created, such as cost savings or incremental extension of the 5G or fiber network, would not have offset the anticompetitive effects of the transaction.
The Solutions
To address the Commission’s competition concerns, Orange and MásMóvil have committed to:
Transfer the spectrum held by MásMóvil to Digi on three frequency bands, two medium frequency bands (1,800 MHz and 2,100 MHz) and one high frequency band (3.5 GHz). The transferred mobile spectrum will allow Digi to build its own mobile network and exert strong competitive pressure on the joint venture;
Enter into an optional national roaming agreement, which Digi may or may not choose to use.
The ability to use the joint venture’s network will complement Digi’s network, which will begin to be rolled out using the divested spectrum. This option is crucial given that, like MásMóvil’s current mobile network, Digi’s future mobile network will likely not cover the whole of Spain. Since the national roaming agreement is optional, Digi will be free to stay with its current wholesale provider (Telefónica) or choose another mobile network operator in Spain (i.e. the new joint venture or Vodafone).
The Commission therefore concluded that the proposed transaction, as modified by the commitments of the parties involved, will no longer raise competition concerns.
The decision is therefore conditional only on full compliance with the commitments: an independent trustee will monitor its implementation.
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