Reports suggest the European Commission is likely to object to the $19 billion merger unless certain conditions are met

In March last year, Orange and Masmovil signed a binding agreement to merge their Spanish businesses, with the combined entity expected to have a market value of roughly $19 billion.

The new business, set to be equally owned by both Orange and Masmovil, would have roughly 7.2 million fixed broadband customers and over 20.2 million subscribers, making it a new market leader in both segments.

At the time, the operators said that they hoped to close to deal by the second half of this year.

However, the road to completion is set to be a difficult one, with the tie-up of such major players drawing significant scrutiny from European regulatory bodies.

The European Commission launched an in-depth probe into the deal in April, seeking to explore whether the merger would reduce competition in the market. In particular, the Commission feared that the move, which would reduce the number of mobile players in the market from four to three, would lead to higher prices for customers and restricted access for virtual operators.

Now, according to sources speaking to Bloomberg, the Commission is preparing to issue a ‘statement of objections’ to the operators, explaining reasons that they may yet veto the tie-up. According to the report, the statement will also offer remedies for these issues.

What these solutions to competition concerns might be was not revealed, but typically these include divestiture of key assets and assurances that other market players will have access to the operator’s combined network at reasonable prices.

The European Commission must make its final decision on the merger by 4 September.

Spain is one of the most crowded and competitive telecoms markets in Europe, driven largely by laws requiring operators to share their networks at regulated prices. Over the past decade, this high level of competition has devolved into a vicious price war that wrought havoc with operators’ revenues.

As a result, rumours of M&A have swirled for years, often with Masmovil at their centre. Indeed, Vodafone Spain has long argued that it should be the merger partner for Masmovil, arguing that their networks were more complimentary and that their combination would present less of a headache to regulators.

Nonetheless, Vodafone has been broadly supportive of Masmovil’s decision to ultimately tie-up with Orange, suggesting that this would still be beneficial for the nation’s telecoms market.

Whether the regulators ultimately agree with this sentiment, however, remains to be seen.

Is Europe’s attitude towards telecoms mergers softening in 2023? Join the operators in discussion at this year’s Total Telecom Congress live from Amsterdam

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