Wednesday, February 21

Orange and MásMovil, one step away from the merger

MasMovil headquarters in Madrid. / Photo: FILE | Video: EP

Both companies are negotiating to form a joint venture that would become the second largest telecommunications operator in Spain, valued at almost 20,000 million euros

Lucia Palacios

New fusion in sight. The telecommunications companies Orange and MásMóvil have announced this Tuesday that they have begun a period of “exclusive negotiation” to combine their businesses in Spain. The resulting entity would take the form of a ‘joint venture’ controlled by Orange and MásMóvil at 50%, with a valuation of the joint entity of 19,600 million euros.

If the negotiation comes to fruition -which everything indicates is already well advanced-, it will be the most important operation in the telecoms sector in Spain in the last two decades and it will become the second largest telecommunications operator in Spain, it will stand up to Telefónica, which it would already exceed in number of customers although not in income or profits, and will be well ahead of Vodafone.

Both entities are valued “attractively”, with the assets of Orange Spain valued at 8,100 million euros, while those of MásMóvil at 11,500 million euros, according to the statement sent. This translates into multiples of 7.5 times the adjusted gross operating profit (Ebitda) of Orange Spain and 11.5 times that of MásMóvil.

The parties expect to close the transaction in the second quarter and conclude it in the second quarter of 2023, once the regulatory approval has been obtained, which will serve to test whether the European Commission has relaxed its competition criteria, since it involves the merger of the second operator of the market and the fourth, which will also leave ‘remedies’.

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french control

The resulting entity will not be consolidated in the balance sheet of either of the two groups and the parties reserve the right to a public sale offer in which the French operator would have the right to take control and optionally consolidate the entity.

Both the president and CEO of Orange, Stéphane Richard, and the CEO of MásMóvil, Meinrad Spenger, have highlighted the importance of the scale that the company acquires to make investments in technologies such as 5G. Spenger has also added the importance of the telecommunications sector in Spain having strong operators with sustainable models.

Orange has had Lazard as financial advisor, while Goldmans Sachs Bank Europe has performed the same task for MásMóvil, which has also had BNP Paribas as financing advisor.

The new group would be the first by customers in Spain with 7.1 million users of fixed services and 20.2 million mobile lines compared to 5.8 million fixed broadband and just under 16 million mobile telephones of Telefónica. In terms of income, it would still be below Telefónica with a turnover of 7,500 million euros and an adjusted gross operating profit of around 2,200 million euros.

In addition, the group’s fiber optic network would exceed 16 million real estate units and the 5G spectrum in the 3.5 GHz band of MásMóvil would reinforce Orange’s leadership in this section. With the merger, the parties hope to reach an industrial scale that facilitates the deployment of 5G and generates synergies of more than 450 million euros from the third year after the closing of the operation.

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