Spanish steps towards mobile consolidation in Europe
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Three is the magic number for European telecom operators, and Spain is leading a new wave of consolidation in the fragmented market.
Orange and MasMovil said on Tuesday they were in exclusive talks to combine their Spanish operations through a €19.6 billion joint venture. If they reach an agreement and the regulators approve, the Spanish players would drop from four to three.
The largest Spanish operator is currently Telefónica, followed by Orange and Vodafone. MasMovil, the fourth-largest operator, was taken private in 2020 after a leveraged buyout by private equity groups KKR, Providence Equity Partners and Cinven.
Anna Gross reports that the news will be seen as a blow to Vodafone, which had also been discussing with parties in Spain possible deals for its Spanish business.
Vodafone chief executive Nick Read has come under pressure from activist investor Cevian Capital to seek more aggressive deals. He identified Spain, Italy and the UK as ripe for a reduction from four to three, and Portugal to drop from three to two operators. Orange said the French market would benefit from a drop from four to three.
The European Commission saw things differently, saying the current level of competition is necessary to keep prices low and give consumers more choice. Operators say they need to increase their yields to justify huge investments in broadband fiber and 5G. They have been selling their tower business to raise more cash lately, but also see consolidation as key.
“The [Spanish] The deal is the first major test of regulators’ appetite for market consolidation since the pandemic,” says Kester Mann of telecoms research firm CCS Insight. “The industry is placing its hopes in a more lenient position as the value of high-quality connectivity has become increasingly evident.”
It cannot, however, rely on the Commission to relax its criteria, with the EU itself making billions of euros available for network upgrades. And any attempt at consolidation can be dragged down through the years by objections from regulators. The industry need only look to efforts to merge Three and O2 in the UK in 2016. An EU block on the deal was only overturned by a European court four years later, date at which the deal was dead anyway.
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