BRUSSELS—Orange SA has secured European Union approval
for its acquisition of Spanish broadband and cellphone operator
Jazztel PLC after agreeing to a package of divestments and
network-sharing agreements that would help launch a new telecoms
operator in Spain.
The €3.4 billion ($3.87 billion) merger had been
closely watched to see how the EU's new executive will approach
future mergers in Europe's rapidly-consolidating telecoms sector.
It will almost double Orange's market share in broadband Internet
access in Spain, and reduce the number of fixed-network telecom
players operating across the country to three, from four.
The deal will enable Orange to leapfrog Vodafone Group PLC to
become Spain's second-largest provider of those services, with a
market share of around 30%. Both companies trail
Telefónica SA, which holds around 43% of the market.
The European Commission, the bloc's top antitrust authority,
opened an in-depth investigation in December, warning the deal
could mean Spanish consumers would face higher prices for fixed
Internet access. Regulators suspended their investigation twice as
they sought to establish whether Spanish consumers would suffer
from the reduced competition.
But the commission said Tuesday that a package of remedies
offered up by Orange had assuaged its fears. The French company
agreed to divest an optical fiber network in Spain and grant the
purchaser access to its copper and mobile networks, including 4G
services.
"The remedies taken as a whole ensure that a fourth nationwide
operator can enter the Spanish market and be able to compete
effectively in markets involving fixed Internet access services,"
the commission said in a statement.
European operators have been lobbying for years to be able to
merge, arguing that such moves would help them boost necessary
investments in their networks. Telecom executives have been
encouraged by the pro-investment stance of the EU's new
Brussels-based executive team, which took office in November.
Orange Chief Executive Stephane Richard said last November the
commission appeared to be more open to consolidation but that the
review of its Jazztel deal would be the first test case for how the
commission approaches such mergers.
The bloc's former antitrust chief Joaquín Almunia
waved through a number of big telecom deals, notably Telefonica's
€8.6 billion purchase of KPN's German mobile operator
E-Plus.
But Margrethe Vestager, the bloc's new antitrust chief, has
warned repeatedly that she won't allow large mergers to take place
at the expense of consumers.
In a statement Tuesday, Ms. Vestager said it had been "very
important" to ensure that consumers in Spain wouldn't suffer from
higher prices.
"With the remedies in this merger a new player may enter the
market and compete as strongly as Orange and Jazztel do today," Ms.
Vestager said.
Write to Tom Fairless at tom.fairless@wsj.com
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