The European Commission has opened an in-depth investigation to assess, under the EU Merger Regulation, the proposed creation of a joint venture by Orange and MasMovil. The Commission is concerned that the transaction may reduce competition in the retail supply of mobile and fixed broadband services as well as of multiple-play bundles in Spain.
Orange and MasMovil are the second and fourth largest operators active at retail and wholesale level for fixed broadband and mobile services in Spain. There are in total four mobile network operators active in Spain, i.e. Telefónica, Vodafone, Orange, and MasMovil. There are also several mobile and fixed virtual network operators which use the network operators' infrastructure to offer mobile and fixed telecoms services to their consumers.
The Commission's preliminary concerns
The preliminary investigation indicates that Orange and MasMovil are close competitors, in the Spanish markets for the retail supply of: (i) mobile telecommunications services; (ii) fixed broadband access services; and (iii) multiple-play bundles, including fixed mobile convergent services.
In particular, the Commission found that:
- The transaction would reduce the number of network operators in Spain, thereby eliminating an innovative and significant rival. This could lead to higher prices and lower quality of telecom services for customers.
- As result of the transaction, Orange and MasMovil would have the ability and incentive to restrict access of virtual operators to wholesale mobile network and wholesale fixed network access services. This could reduce the ability of such operators to compete, and in turn lead to higher prices and lower quality of services for end customers in Spain.
The Commission will now carry out an in-depth investigation into the effects of the proposed transaction to determine whether its initial competition concerns are confirmed.
The proposed transaction was notified to the Commission on 13 February 2023. On 2 March 2023, the Spanish Competition Authority requested a referral of the case under Article 9 of the EU Merger Regulation. This referral request is pending.
The Commission now has 90 working days, until 21 August 2023, to take a decision. The opening of an in-depth inquiry does not prejudge the outcome of the investigation.
Companies and products
Orange, headquartered in France, is a global telecommunications operator active in the Spanish telecommunications market through its subsidiary OSP. OSP provides mobile and fixed telecommunication services to residential customers, business customers and wholesale customers in Spain. It operates under three brands: Orange, Jazztel, and Simyo.
Lorca, headquartered in UK, is a holding company controlling MasMovil. MasMovil provides fixed and mobile telecommunications services mainly to residential customers in Spain. It operates under a wide variety of brands, such as Yoigo, MásMóvil, and Virgin, as well as digital-focused brand Pepephone, regional brands Euskaltel, R., Guuk, Embou and Telecable and international customers brands Llamaya, Lebara, Lycamobile.
Merger control and procedure
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or a substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
However, as part of the current matter, the Phase I deadline was extended by 10 working days following a request made by the Spanish Competition Authority, under Article 9 of the EU Merger Regulation.
In addition to this transaction, there are currently eight on-going Phase II merger investigations: : (i) the proposed acquisition of OMV Slovenija by MOL; (ii) the proposed acquisition of Alumetal by Hydro; (iii) the proposed acquisition of Activision Blizzard by Microsoft; (iv) the proposed acquisition of eTraveli by Booking; (v) the proposed acquisition of Lagardère by Vivendi;(vi) the proposed acquisition of VMware by Broadcom; and (vii) the proposed acquisition of Inmarsat by Viasat; and (viii) the proposed acquisition of Asiana by Korean Air.
