Three is the magic number for European telecommunications operators, and Spain is leading a new round of consolidation of the fragmented market.
Orange and MasMovil said on Tuesday that they were in exclusive talks to combine their businesses in Spain through a €19.6 billion joint venture. If they reach an agreement and the regulators approve it, the Spanish players would be reduced from four to three.
Currently, the largest operator in Spain is Telefónica, followed by Orange and Vodafone. MasMovil, the fourth largest operator, went private in 2020 following a leveraged buyout by private equity groups KKR, Providence Equity Partners and Cinven.
Anna Gross reports The news will be perceived as a blow to Vodafone, which had also been talking to parties in Spain about possible deals for its Spanish business.
Vodafone Chief Executive Nick Read has been under pressure from activist investor Cevian Capital to pursue deals more aggressively. He has identified Spain, Italy and the UK as countries ripe for a reduction from four to three, and Portugal from three to two operators. Orange has said that the French market would benefit from a move from four to three.
The European Commission has seen things differently, believing that the current level of competition is necessary to keep prices low and give consumers more choice. Operators say they need to increase their profits to justify big investments in fiber broadband and 5G. They have been selling their tower businesses to raise more cash lately, but they also see consolidation as key.
“The [Spanish] The deal is the first major test of regulators’ appetite for consolidation in the market since the pandemic,” says Kester Mann of telecoms research firm CCS Insight. “The industry has pinned its hopes on a more lenient stance as the value of high-quality connectivity has become increasingly apparent.”
However, he cannot count on the commission to soften its criteria, as the EU itself makes billions of euros available for network upgrades. And any attempts at consolidation may be delayed for years due to objections from regulators. The industry only has to look at efforts to merge Three and O2 in the UK in 2016. An EU bloc in the deal was only struck down by a European court four years later, by which time, the deal was dead on all sides. modes.
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