Orange and Masmovil Obtain Clearance for €18.6 bn Deal to Merge in Spain

Orange and Masmovil have obtained clearance from the European Commission for the €18.6 billion deal to merge their operations — becoming the largest telecom operator — in Spain.
Orange 5G mobile businessOn July 23rd, 2022, Orange and Masmovil announced their decision to establish a 50-50 joint venture known as LORCA JVCO, with equal governance rights for both parties. UK-based Lorca Group owns Masmovil.

The JV of Masmovil and Orange will be challenging rival telecoms such as Telefonica and Vodafone and several MVNOs in Spain. Hence, the European Commission announced the approval with several conditions.

The EC has asked Masmovil to sell spectrum held by Masmovil to Digi across three frequency spectrum bands, two medium frequency bands (1,800 MHz and 2,100 MHz) and one high frequency band (3.5 GHz). The mobile spectrum to be divested will enable Digi to build its own mobile network and to exert a strong competitive constraint on the joint venture.

The JV must enter an optional national roaming agreement, which Digi can decide to use or not. The possibility to use the JV’s network will complement Digi’s own network, which Digi will start rolling out with the use of the divested spectrum. As the national roaming agreement is optional, Digi will be free to remain with its current wholesale provider (Telefonica) or choose another mobile network operator in Spain (i.e., the joint venture or Vodafone).

The JV between Masmovil and Orange aims to form a dominant force in the Spanish market, combining their resources in terms of customer base, user experience, talent, fiber and mobile coverage. The JV is expected to solidify the financial standing of the combined entity, enabling investments in the development of telecom infrastructure in Spain.

The joint venture will oversee services for over 7.3 million fixed customers, more than 30 million mobile subscribers, and approximately 2.2 million TV customers. The entity will manage crucial network and IT assets to ensure nationwide coverage in both fiber and 4G/5G technologies.

Financially, the combined entity is projected to achieve revenues exceeding €7.4 billion and an EBITDAaL  of over €2.3 billion. With an enterprise value of €18.6 billion, synergies of more than €450 million per year are anticipated, starting from the fourth year post-closing.

As part of the agreement, the companies have committed to divesting 60MHz of spectrum assets to Digi, pending approval from the Spanish Government. Additionally, they plan to propose an optional national roaming agreement at market conditions.

Christel Heydemann, CEO of Orange, emphasized the strategic significance of the joint venture, stating, “Our proposed Joint Venture with Masmovil will create a single, stronger, and more sustainable player in Spain.”

Meinrad Spenger, CEO of Masmovil, said:“Our exceptional team is committed to forming a unified and distinctive company capable of delivering positive impact and providing a trustful service to the most satisfied clients in Spain.”

The completion of the merger between Orange and Masmovil is expected by the end of the first quarter of 2024. Until then, both Orange and Masmovil will continue to operate independently.

Baburajan Kizhakedath