Both companies are big players in the mobile and broadband market, so this collaboration creates a very strong player in the Spanish market. The companies have been talking about the possibility of collaboration for a longer house however only now have they released a statement about the final agreement.
The control of this merger will be 50/50 from both companies
The merger is expected to take the form of a joint venture that will be controlled 50% by both companies. Thus, both companies will have equal rights to manage the project, which could become a subject of disagreement and conjecture in the future.
The two parties have therefore agreed that subject to certain conditions, they may again terminate the merger. In this case, it would be the launch of an IPO, so that Orange could take control at the IPO price.
The biggest advantage of this merger should be the efficiency gains. Each of the companies has its strengths which, when combined, should result in a more stable company with the possibility of more efficient investments primarily in FTTH and 5G.
At the same time, the competitive space in the market will be cleared a bit, as instead of 4 major competitors, there will be only 3. The Spanish market will be shared between Telefonica, Vodafone and the newly formed Orange and MasMovil.
Earlier this year, market regulator CNMC did a survey where the biggest operators in the market split their shares like this. Telefonica had the largest share at 28.24%. In second place was Orange with 22.91%, Vodafone with 22.26% and finally MasMovil with 20.55%.
How will it be in numbers?
So the whole merger will be worth €18.6 billion ($19 billion). The statement shows that €10.9 billion will be for MasMovil and €7.8 billion for Orange.
The combined entity is expected to have annual revenues of more than €7.3 billion with an annual underlying operating profit of more than €2.2 billion.
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The entire transaction is expected to close in the second half of 2023 at the latest, subject to greater scrutiny and approval by the antitrust authorities. There may therefore still be a hitch that could disrupt the merger. Until all conditions are approved, the two companies will operate separately.