Proposed operation on the telecommunications market. After months of informal conversations between Orange and MásMóvil this Saturday, the two operators concluded the merger of their companies in Spain (the assets of MásMóvil in Portugal and the tower operator of Orange Totem, present in the Spanish market, are excluded from this transaction) to create a giant valued at 18,700 million euros, customer leader in the Spanish market in both broadband and mobile. In a press release, they announced the creation of a “joint venture” whose capital is shared 50% between the two companies with the possibility that, by mutual agreement, the two may activate a public offering (OPV) after a defined period from the launch of the new company (between 24 and 42 months). An option aimed in particular at Orange, which will have the possibility of taking control of the new company. An intention that has been glimpsed in various public interventions the CEO of Orange Spain Jean François Fallacher pointing out that they will be very active in the Spanish market in the years to come.
The two telecoms have announced their intention to return to the stock market in the medium term and that this operation will also allow them to accelerate their investments in fiber and 5G in Spain. The deal they signed on Saturday values Orange at around 7.8 billion euros and Másmóvil (including Euskaltel, acquired last year) at 10.9 billion euros. The two operators have estimated through different studies potential synergies of more than 450 million euros per yearfrom the fourth year after closing of the transaction.
Likewise, it was requested new financing of 6,600 million euros to a banking “pool” to make, among other transactions, a payment of 5,850 million euros to the shareholders of the two telecoms. For which the financial situation of the two companies will be taken into account.
In all casesMásmóvil’s debt will remain with the new company. The two operators have agreed to maintain a leverage (debt) target of 3.5 times the net debt to EBITDA ratio to facilitate a future IPO of the joint venture.
On the distribution of power within the new company, sources close to the two operators assured that there is still a long way to go and that nothing is closed in this regard. In recent months, market sources have pointed out that the presidency will go to Orange and that the future CEO will correspond to Másmóvil. Specifically, Telecom CEO Meinrad Spenger. Despite the above, the economic management would also fall into the hands of Orange.
Acceleration of investments in fiber and 5G
For the CEO of Orange, Christel Heydemann, the operation in Spain “paves the way for the creation of a joint venture that unites the forces of Orange and Másmóvil into a single strong operator, which will enable investments in 5G and fiber, for the benefit of customers all over Spain”. The boss of the global operator gave this movement a “fundamental importance” since it is the company’s second market.
De Másmóvil, its CEO Meinrad Spenger stressed that we are facing “a great day for Spanish consumers” and showed his confidence that together with Orange they can forge “a strong operator with a sustainable economic model and the ability to invest in infrastructure, technology and talent globally”. In this sense, he added that this consolidation within the Spanish market will encourage competition.
Waiting for Brussels
In any case, the operation must still receive the approval of the competition authorities, in particular of Brussels, which closely follows the evolution of the telecommunications market. This can open the doors to possible remedies (‘remedies’) which can benefit small operators such as Avatel and Adamo Telecom. For all of the above, both parties intend to complete the merger in the second half of 2023 I eat very late. Until then, the two operators will continue to operate independently.