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Orange and MasMovil merger could “open floodgates” on more alliances

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Orange

Orange and MasMovil’s (LORCA JVCO) talks to combine business operations in Spain could “open the floodgates” for further consolidation between major carriers in Europe.

That is the view of Kester Mann, director of consumer and connectivity at CCS Insight after it was announced today that Orange and MasMovil had entered exclusive discussions of a possible merger.

The prospective deal would be a 50/50 partnership and will see the merged company co-controlled by both Orange and MasMovil, boasting a combined valuation of €19.6 billion.

A statement released by Orange this morning said that the joint venture would own network assets that provide it with a competitive edge in the market including a nationwide Fibre-to-the-home (FTTH) network reaching over 16 million homes and a leading-edge mobile network.

Orange had previously declined to comment on speculation linking it with a possible joint venture but the transaction is now expected to be signed by Q2 2022 and close by Q2 2023 subject to regulatory approval.

Mann says that the latest move could pave the way for further alliances in markets such as Italy, Portugal and the UK.

“The deal is the first major test of regulators’ appetite for in-market consolidation since the pandemic,” he said.

“The industry has been pinning its hopes on a more lenient stance as the value of high-quality connectivity became ever more apparent and operators argue that they need greater certainty to make huge investments in future fibre and 5G networks.”

He adds that the sector will be watching developments with an “eagle eye”.

Mann also notes that in recent weeks operators in Spain have made no secret of their ambition to combine operations in one of Europe’s most competitive markets.

This, he says, proves that it was simply a matter of who would reach an agreement first and when.

He adds that Vodafone has been exploring a deal in Spain, having previously been linked to possible transactions with Three UK and Iliad and today’s news could be considered a blow to activist investor Cevian Capital.

“However, it may also consider that any move to reduce the number of players – even if involving other operators – is a positive development,” Mann added.

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