Antitrust regulators in the European Union (EU) have raised alarm over the proposed merger between Orange and MasMovil’s Spanish operations, citing potential negative impacts on competition and increased prices within the telecommunications sector. This development comes as the European Commission deliberates on whether to relax its stringent approach to mergers that would reduce the number of major mobile telecommunications operators from four to three in a specific market. Orange, the second largest telecoms provider in Spain, and MasMovil, the fourth-ranked player, announced their merger plans in July 2022, with the deal valued at €18.6 billion ($20.3 billion).
Image@ Credit-Euronews
EU Competition Watchdog Voices Concerns
The European Union (EU) competition watchdog reiterated its reservations about mergers that result in a reduction from four to three players and formally expressed its objections to Orange and MasMovil through a statement. Presently, the companies face competition from two other mobile network operators in Spain, namely Telefonica and Vodafone. The European Commission voiced apprehension that the proposed merger could diminish the number of network operators in Spain, eliminating a significant competitive force and an innovative rival in the retail markets for mobile telecommunications services, fixed internet services, and bundled offerings.
Potential Impact on Consumers and Retail Prices
The European Commission cautioned that the merger could lead to significant price hikes for retail consumers. It highlighted the substantial anticipated anticompetitive effects, even when taking potential cost savings into account. The Commission emphasized that competition has been instrumental in driving investment and ensuring service quality within the Spanish market, amplifying the concerns surrounding the potential outcomes of the merger.
Companies Defend the Merger
Orange affirmed its commitment to presenting the merger’s benefits to the Commission, underscoring the advantages for consumers and businesses, such as enhanced innovation and investments in 5G and fiber optics infrastructure in Spain. The companies involved have the option to request a closed hearing to present their case before the EU competition watchdog makes a final decision on the merger by September 4.
Conclusion
The proposed merger between Orange and MasMovil’s Spanish operations is under scrutiny by EU antitrust regulators, who are wary of potential competition reduction and subsequent price increases within the telecommunications market. This case serves as a significant precedent for the European Commission’s stance on mergers that decrease the number of major players in a given market. Orange and MasMovil have the opportunity to defend their position before the EU competition watchdog reaches a verdict on the merger.
