Orange Spain and MasMovil announce their merger in the Spanish telephone market

Two of the biggest operators in the Spanish telephone market, Orange Spain and MasMovil, have announced their merger.

In a joint statement released on Friday, July 23, two of the biggest mobile operators in the Spanish market have announced their merger with which they will create a single mobile and fixed service provider for consumers in Spain. Orange Spain and MasMovil have signed a binding agreement to form a new company valued at €18.6bn.

Hoy anunciamos que @Orange y @masmovil han firmado un acuerdo para unir sus operaciones en España. Buenos días! https://t.co/JqPmrGQwUa vía @orange_es

— Orange España (@orange_es) July 23, 2022

This merger between the second and fourth-largest operators in Spain will create a serious economic threat to Telefonica, whose Movistar brand is currently the biggest provider. It also leaves the third-placed company, Vodafone, in a tricky situation. Analysts have already suggested that this could well pave the way for similar mergers in the telephone markets of the UK, Italy, and Portugal.

It is hoped that the deal can be completed ‘at the latest’ in the second half of 2023, but it is subject to approval from the EU antitrust authorities first.

It remains to be seen what the European Commission makes of this latest collaboration, as it has always wanted markets to thrive fairly with at least four options available to consumers, and this deal cuts Spain’s market to just three main operators.

According to data from market regulator CNMC in March, Movistar had cornered 28.4 per cent of the Spanish market. Orange had 22.91 per cent, Vodafone 22.6 per cent, and MasMovil with 20.55 per cent.

As detailed in the statement, MasMovil brings €10.9bn to the deal and Orange Spain with €7.8bn. Their combined companies are expected to generate annual revenue of more than 7.3bn, with annual core operating profits in excess of €2.2bn. The new entity will be financed by a €6.6bn package equally controlled by Orange and MasMovil.

The statement revealed that Orange had a lower valuation than MasMovil, and as a result will receive an upstream payment of €4.2bn given the company’s higher debt levels. Neither company will be allowed to sell its shares for two years under the terms of the agreement. A spokesperson for Orange said that after the two-year period a possible initial public offering (IPO) could be looked at.

MasMovil’s shares could be purchased by Orange after this initial two-year period said the Orange spokesperson, due to a pre-emptive right included in the agreement. That would enable Orange to take control of the entity and consolidate it in its accounts.

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