Orange and Masmoville sign $19 billion merger deal in Spain

  • The combined entity creates a competitor to Telefonica
  • The offer includes a payment of 4 billion euros to Orange
  • The joint entity aims to underwrite in the medium term

PARIS/MADRID, July 23 (Reuters) – Telecom companies Orange (ORAN.PA) and MasMovil (MMBMF.PK) have signed a binding agreement to merge operations in Spain in a deal that values ​​the combined entity at nearly $19 billion. He said in a statement on Saturday.

The merger creates a heavyweight that spans mobile and broadband, posing a challenge to the largest telefonica and potentially opening the way for similar alliances in markets such as Italy, Portugal and the UK.

The merger of the second and fourth largest telecom operators, respectively, also leaves third-ranked Vodafone stuck, albeit the beneficiary of a more consolidated market that is expected to reduce competition and boost operator profitability.

Register now to get free unlimited access to Reuters.com

This alliance is expected to test the European Commission’s appetite for integration. It has previously opposed deals that reduce the number of players from four to three in major markets.

Data released by the market regulator CNMC in March showed that the mobile phone market in Spain is a four-way battle with Telefonica’s Movistar brand holding a 28.24% stake, Orange 22.91%, Vodafone 22.26% and MasMovil 20.55%.

The Commission’s response will also reveal whether it is willing to favor a market structure with fewer operators and potentially higher investment in infrastructure – as industry is pressing on it – or whether it will stick to a consumer-centric attitude marked by fierce competition and lower prices.

The two companies said in the statement that the merger in Spain is based on an enterprise value of 18.6 billion euros ($19 billion), including 10.9 billion for MasMovil and 7.8 billion for Orange Spain.

They said the combined entity would generate annual revenue of more than 7.3 billion euros and more than 2.2 billion euros in annual base operating profit.

The joint venture will be controlled equally by Orange and MasMovil. A debt package of 6.6 billion euros will finance the deal.

The €4.2 billion will include an initial payment for Orange to offset its lower valuation compared to MasMovil, given its high level of debt.

A spokesperson for Orange said the deal includes a two-year closing clause that prevents Orange and MasMovil from selling their shares.

The goal is to get a potential initial public offering (IPO) after a shutdown period, the spokesperson said.

The Orange spokesperson said, it will have a pre-emptive right to buy MasMovil-owned shares in the joint venture after the closing period, allowing it to take control of the entity and consolidate it in its accounts.

The transaction is subject to approval by EU antitrust authorities. It is expected to close in the second half of 2023 “at the latest”.

Orange is controlled by the French state with a 23% stake, while Masmophile’s parent company is London-based Lorca JV Co, which is majority owned by buyout funds KKR, Providence and Cinven.

(1 dollar = 0.9794 euros)

Register now to get free unlimited access to Reuters.com

(Reporting by Matthew Rosemin) Editing by Angus McSwan and Jason Neely

Our Standards: Thomson Reuters Trust Principles.

Leave a Reply

%d bloggers like this: