Sources suggest that the two operator giants were in discussions the conduct a merger, but French opposition ultimately saw the negotiations cut short

According to anonymous sources speaking to French news channel BFM TV, Orange and Vodafone were considering a merger of equals towards the end of 2020 and the start of 2021. 

This move would have had huge ramifications for telecoms markets all over the world. It would have created Europe’s largest operator, with revenues of around €85 billion, as well as having major implications for Africa, where both operators compete in numerous markets. 

However, according to the sources, the discussions were ultimately halted when the companies faced opposition from the French state, who feared their loss of influence, especially with the new company potentially being headquartered in London.

The French government currently holds a 23% stake in Orange via the Agence des participations de l’État (APE, literally the ‘State participation agency’). Earlier this year, APE said it had no intention of changing its stake in Orange for the short term but did not discount making changes in the medium term.

But while this monumental merger now seems unlikely to materialise, the two operators nonetheless are open to smaller deals in their relevant markets. Last month, for example, Vodafone CEO Nick Read said Vodafone Group was looking to acquire tower assets in Europe, citing Orange’s towerco, Totem, as a potential merger candidate. 

Vodafone created Vantage Towers, comprising the companies 82,000 tower assets across ten European markets, earlier this year and immediately listed it on the Frankfurt Stock Exchange.

Further M&A intrigue could be happening in Spain, one of the most competitive and arguably congested markets in Europe. With four major mobile telcos and a significant number of smaller players, profit margins in Spain are slim, with the operators having called for consolidation for many years. 

The country’s fourth-place player, Masmovil, recently received approval for the $2.4 billion acquisition of Basque operator Euskaltel, but further mergers in the market could yet be on the horizon.

“We are actively thinking about the Spanish market and its structure,” said Orange Chief Financial Officer Ramon Fernandez last month. “If there is a good M&A option involving us directly, we will consider it of course.”

Vodafone, Orange, and Telefonica have all announced job cuts in the Spanish market in recent months, citing the need to streamline their operations in the face of intense competition and expensive network rollouts.

It is worth noting, however, that this is a time of considerable upheaval for Orange, whose CEO, Stephane Richard, notably left the company at the end of last month, having been convicted of misusing public funds back in 2008, when he was chief of staff to then French Finance Minister Christine Lagarde. 

Exactly what effect Richard’s exit will have on any potential M&A remains unclear for the time being, and will likely remain so until a successor is appointed, a process that Orange says should be complete by January 31 2022.


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