Orange is merging its activities in Spain with MasMovil for 18.6 billion euros
ORANGE COMBINES ITS ACTIVITIES IN SPAIN WITH MASMOVIL FOR 18.6 BILLION EUROS
PARIS (Reuters) – Orange and MasMovil have signed an agreement to combine their operations in Spain for a combined enterprise value of 18.6 billion euros, the two telecom operators said in a statement on Saturday.
This agreement is the result of exclusive negotiations announced on March 8th to create a joint venture equally owned by the two groups, respectively number two and number four in the Spanish market.
For analysts, this merger, which directly threatens Telefonica’s leading position in Spain, could pave the way for a similar consolidation in other markets such as Italy, Portugal or the United Kingdom, against the background of investments needed for the development of 5G.
However, it has yet to be approved by the European Commission’s competition services, which have previously opposed proposed mergers to reduce the number of operators in certain major markets from four to three to avoid price hikes for consumers.
The transaction, which is expected to be completed no later than the second half of 2023, gives Orange Spain an enterprise value of 7.8 billion euros and MasMovil 10.9 billion euros.
This will be accompanied by 6.6 billion euros of debt, of which 4.2 billion will be paid to Orange in cash to offset this valuation difference given the two companies’ respective pre-transaction debt levels.
The future company is expected to generate more than 7.3 billion euros in annual sales and an annual operating result of more than 2.2 billion euros.
This merger should enable synergies of more than 450 million euros per year from the fourth year after the closing of the transaction.
After France, Spain is Orange’s second largest market, where the four main operators have engaged in a price war with Telefonica and Vodafone that has weighed on the French group’s sales and margins for several years.
The operator resulting from this merger “will be stronger and able to invest in 5G and fiber optics for the benefit of customers throughout Spain,” explained Christel Heydemann, Orange’s general manager since April, as quoted in the statement.
“I firmly believe that the creation of this new company is fundamental for the group, for the Spanish telecom market and for customers,” she added.
The agreement provides for a two-year period during which Orange and MasMovil cannot sell their shares, a spokesman for the French operator said, adding that the target is a possible IPO thereafter.
In such a case, Orange has the option to take control of the new company at the IPO price.
(Matthieu Rosemain and Bertrand Boucey)
