By Tom Fairless
BRUSSEL--Antitrust regulators in the European Union have opened
an in-depth probe into Orange SA's EUR3.4 billion ($4.19 billion)
bid for Spanish broadband and cellphone operator Jazztel SA,
throwing down a hurdle to a deal that would significantly boost the
former French telecom monopoly's market share in Spain.
The probe comes amid a debate over whether to recast EU
competition rules to encourage deal-making across the region's
telecom sector, which remains largely fragmented along national
lines.
The European Commission, the EU's top antitrust authority, said
it was concerned that the deal would lead to higher prices for
Spanish customers of fixed Internet and fixed-mobile triple play
deals.
The transaction, which was announced in September, would almost
double Orange's market share in broadband Internet access in Spain,
leapfrogging Vodafone Group PLC to become the country's
second-largest provider in that segment. Both companies trail the
market leader, Telefónica SA.
The commission said the merger might "change the merged entity's
incentive" to compete with Telefónica and Vodafone, the two
remaining nationwide operators, in the market for fixed Internet
access.
It said its concerns were heightened by the growing popularity
of fixed-mobile triple play offers--comprising a combination of
fixed voice, fixed Internet and mobile services--which can only be
offered by operators with both fixed and mobile networks.
Orange said it was still confident of a "favorable outcome" for
the review. It said it had factored an in-depth probe into its
calculation for when the deal would close, which it still expects
to occur in the first half of next year.
Spain is Orange's second-largest market, accounting for around
10% of the group's revenue.
Orange last month suggested a remedy aimed at addressing the
commission's concerns about the deal, but it was judged to be
"insufficient," the regulator said. A final decision on the case is
due by April 24, 2015.
Consolidation has been heating up in Europe's telecom market
over the past year, reducing the number of operators in each
market. Earlier this year Vodafone in Spain purchased Ono SA, a
midsized cable operator, for EUR7.2 billion. Germany and Ireland
have also seen similar moves where small players have fallen prey
to bigger rivals--Telefonica's EUR8.6 billion acquisition of
Germany's E-Plus and Hong Kong-based conglomerate Hutchison
Whampoa's EUR780 million purchase of O2 Ireland.
Both of the latter deals faced in-depth probes by the
commission, which demanded tough concessions amid concerns they
could lead to higher prices for consumers.
The EU's new executive team, led by former Luxembourg prime
minister Jean-Claude Juncker, entered office last month with a
pledge to create a digital single market by breaking down national
silos in telecoms regulation and competition law.
Ruth Bender in Paris and Christopher Bjork in Madrid contributed
to this article.
Write to Tom Fairless at tom.fairless@wsj.com
Access Investor Kit for Telefonica SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=ES0178430E18
Access Investor Kit for Orange SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=FR0000133308
Access Investor Kit for Jazztel Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00B5TMSP21
Access Investor Kit for Vodafone Group Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00BH4HKS39
Access Investor Kit for Orange SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US6840601065
Access Investor Kit for Telefonica SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US8793822086
Access Investor Kit for Vodafone Group Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US92857W3088
Subscribe to WSJ: http://online.wsj.com?mod=djnwires