Orange Spain announces a proposed merger with MásMóvíl
The latest attempt by a leading European operator to gain scale has seen the light of day, with Orange and MásMóvíl announcing that they have entered into exclusive talks to combine their operations in Spain.
The combination would take the form of a 50-50 joint venture with a combined business valuation of €19.6 billion. Valuations are attractive for both companies, with Orange Spain’s enterprise value at €8.1 billion and MásMóvíl’s enterprise value at €11.5 billion. The deal would see the combined entity adopt equal governance rights and neither party would consolidate the combined operations.
The agreement between the parties also includes a right to trigger an IPO under certain conditions for both parties, and a right of control for Orange to consolidate the combined entity in the event of an IPO. Orange would neither be forced to exit nor to exercise these options.
Still, by far the most interesting part of the deal would be the pooling of the assets of the respective companies and what that would mean for the Spanish telecommunications arena. The two companies say the joint venture would leverage “highly complementary” business models as well as existing successful collaboration, to serve just over seven million fixed customers, of which 5.6 million are convergent, 11, 5 million Orange Spain mobile subscriptions and 8.7 million MásMóvíl mobile customers under contract and nearly 1.5 million TV customers.
The combined entity would have revenues of over €7.5 billion, an EBITDAaL of over €2.2 billion and the ability to achieve the scale and efficiency needed for today’s market.
With such a base and combined assets, companies expressed confidence that they would have a competitive edge in the market, including a state-of-the-art nationwide fiber-to-the-home (FTTH) network reaching more than 16 million residential and a state-of-the-art mobile network with full national coverage, serving significant volumes of traffic in the Spanish market. Additionally, the companies said they would undertake an ambitious and sustainable expansion of its FTTH and 5G networks and help ensure Spain maintains and further develops a competitive telecommunications infrastructure.
Only recently Orange announced what it called the largest 5G network rollout plan in the 700 MHz frequency band in Spain, rolling out gradually throughout 2022 in more than 1,100 cities. including 820 with between 1,000 and 50,000 inhabitants.
They also assured that with a “comprehensive and complementary” portfolio of brands, the joint venture will provide Spanish consumers and businesses with competitive and differentiated value propositions to meet the needs of all market segments, with high quality connectivity. , excellent customer experience and a comprehensive portfolio of innovative services in the demanding digital landscape.
Commenting on the agreement, Orange CEO Stéphane Richard said: “I look forward to creating this joint venture with MásMóvíl, building on our existing successful collaboration, to become a stronger player capable of achieving the investments needed to develop the Spanish market.
“I know I can count on Jean-François Fallacher and the entire Orange Spain team for their full mobilization until the closing in order to make this deal a success.
MásMóvíl CEO Meinrad Spenger added: “To ensure state-of-the-art 5G and FTTH telecommunications infrastructure and exceptional service in Spain, we need strong operators with sustainable business models. The combination of Orange and MásMóvíl would benefit consumers, the telecommunications sector and Spanish society as a whole. »
The transaction is expected to be signed by the second quarter of 2022 and is expected to be finalized by the second quarter of 2023, subject to the approval of the relevant administrative, competition and regulatory authorities. However, an analyst at Europe’s leading credit rating agency Scope Ratings warned that Orange faces a long period of regulatory uncertainty over the planned merger in a test of Europe’s anti-trust framework in the sector.
Jacques de Greling, director of corporate ratings at Scope Ratings, noted that the anti-trust framework in Brussels has not changed for some time, although Orange believes that the case for market consolidation is now more solid.
Richard said the price of triggering market consolidation in a market like Spain is the 12-18 month anti-trust process in Brussels, with all the associated uncertainties.