The regulator’s provisional position will be uncomfortable reading for those that see the proposed JV as a test case for future in-market consolidation in Europe
EC’s Statement of Objections: On 27 June 2023, the EC shared with Orange and MasMovil its concerns regarding their proposed joint venture in Spain, outlining a preliminary view that the deal may reduce competition in the retail supply of mobile and fixed internet services, and of multiplay bundles. The transaction was announced by the parties in July 2022 and formally notified to the EC on 13 February 2023, at which point it began a Phase I review. The preliminary investigation indicated that Orange and MasMovil – the second and fourth largest operators in Spain – are close competitors in several national telecoms markets, with Margrethe Vestager (Executive Vice President, EC) highlighting MasMovil’s role as a ‘successful challenger’ in recent years. The EC therefore launched a Phase II review of the JV on 3 April, stating that it would take a final decision by 21 August (subsequently extended to 4 September).
In-depth review foresees price rises for consumers: The EC states that it has conducted a wide-ranging investigation to understand the affected markets and the potential impact of the transaction, which has included analysing internal documents from the parties and gathering views from competitors (e.g. Telefónica and Vodafone), suppliers and customers. As a result of this review, the EC considers that the proposed transaction may reduce the number of network operators in Spain, thereby eliminating a “significant competitive constraint and innovative rival” in the country’s retail markets for mobile telecoms services, fixed internet services and multiplay bundles (including fixed-mobile convergent packages). Specifically, the EC is concerned that the deal may lead to significant price increases for affected retail customers. It adds that the predicted anti-competitive effects are substantial even after taking potential cost savings into account, in a context where competition has been a driving force behind investment and quality of service in the market.
No signs of a softer attitude towards telecoms M&A: The EC was keen to emphasise that a Statement of Objections is a formal step in the merger control process, which does not “prejudge the outcome” of an investigation. Orange and MasMovil now have the opportunity to reply to the EC’s set of concerns, to consult its case file and to request an oral hearing. Nevertheless, the regulator’s provisional position will be uncomfortable reading for those that see the proposed JV as a test case for future in-market consolidation in Europe. At ETNO’s recent Digital Policy Day, stakeholders outlined the need for operators to gain scale, while Wolfgang Kopf (Deutsche Telekom) bemoaned the EC’s “stupid doctrine” opposing four-to-three mergers. With the parties supposedly disinclined to offer the concessions that might have closed the review in Phase I, they now have two months to make submissions and to offer the remedies (likely significant ones) to sufficiently allay the EC’s concerns.
