José M. Rodríguez Silva
Updated Wednesday, February 21, 2024-02:04
Companies The European Commission approves the merger of Orange and MásMóvil that will create the operator with the most customers in Spain
The approval of the merger between
Orange and MásMóvil
by the European Commission puts an end to two years of waiting since the agreement between the parties was signed, but far from the negotiations for the directors of the companies involved.
The group will lead the Spanish market by number of clients, a historic milestone, since, for the first time,
Telefónica will not dominate the market, although it will maintain its throne in income, television and profits
. With a value of 18.6 billion euros, the new group will add more than 30 million mobile lines and more than seven million fixed broadband lines.
However, during this period, the companies have continued to act independently, so the company's final strategy still has many issues pending closure.
THE NEW BRAND
One of the first unknowns is essential for the future of the group: the name and brand of the new company, of which
MásMóvil and Orange will share 50% of the shares
.
The
joint venture
will serve as an umbrella for a group that was born with dozens of brands. To the three that Orange has in its portfolio (Orange itself, Jazztel and Simyo) is added the very wide offer of the MásMóvil group that has national operators such as
Yoigo, MásMóvil, Virgin Telco and Pepephone
, the regional brands acquired from Euskaltel and the prepaid operators such as
Lycamobile, Lebara and Llamaya
.
The operator, led by
Meinrad Spenger
, was already considering cutting some of its brands, especially in prepaid, and could now opt to eliminate more brands, although the multi-brand strategy has historically worked for the
yellows.
PRICES
One of the unknowns that most worries the company's clients is whether their monthly payment will vary. In the statement approving the merger, Brussels defended that, if the transfers to Digi were not imposed, prices could have
risen by up to 10%.
Orange and MásMóvil have so far followed different pricing strategies, but they fit into what has been happening in the vast majority of operators. The Orange brand has already announced to its customers that in April it would raise its prices and it is expected that it will remain that way, since it is the brand called to maintain the
premium consumer.
On the other hand,
MásMóvil
has been the only one of the four operators that has not made price increases in recent years, which had added pressure on its margins due to the increase in debt costs, a scenario that will now have to reevaluate after the fusion.
SAVINGS AND CUTTING?
The merger will generate
synergies of 450 million annually
, according to calculations presented by the company. Throughout the period prior to authorization, managers have defended that these will be generated by the larger scale of the group which will allow it to achieve, for example, better prices and avoid double expenses when designing networks.
However, already in the last presentation of results, the CEO of Orange,
Christel Heydemann
, recognized that part of the savings would come from the
amortization of management positions
, something logical when uniting two companies where positions are duplicated.
In this context, the unions of the different companies of the group have repeatedly requested
that employment be guaranteed
to the staff of the two companies. The CEO of Orange Spain, and future financial director of the
joint venture,
Ludovic Pech
, assured in a press conference last week that "the operation is justified by industrial synergies and not by employment possibilities."
EREs in the sector are not strange, with Telefónica as the latest exponent, but it is true that
MásMóvil has executed its entire growth strategy without resorting to them
.
TOO MANY ALLIANCES AND SUPPLIERS
An element where cuts are discounted in the complex map of suppliers and alliances that is revealed after the merger. Operators have been outsourcing numerous parts of the business for years and creating new services in alliance with insurers and security companies that they will now have to reconcile.
Some are easier, since for example, MásMóvil has always had
Cetelem
, a brand of BNP Paribas, as a great financial partner, the French bank that negotiates with Orange
the purchase of Orange Bank in Spain
, a process that will be resolved "soon" in Pech's own words.
In others they are not so simple. Both companies have different insurance companies to sell various types of insurance. In addition, Orange has its own important
call center
,
which may lead MásMóvil to dispense with some of its subcontractors
in this field.
THE FUTURE OF THE NETWORK
At a business level, the focus of the new company is clear:
reduce debt
. The new company is going to inherit the 6,000 million euros of liabilities that MásMóvil, as well as a similar amount corresponding to the dividend that the two parties are going to distribute to close the operation at 50% (4,200 million euros for Orange and 1,650 million euros for MásMóvil shareholders).
To achieve this, the most recurring option that has been adopted in the sector is
the sale of part of the fiber optic network
. MásMóvil has already sold part of its infrastructure to the wholesale operator Onivia and a group of Basque investors, but it still maintains other networks and has also received public funds to deploy local fiber.
Traditionally, French companies have been wary of not completely controlling assets, but, from France, it is indicated that Orange is studying doing the same in France, its main market and in which it occupies a more strategic role (it should be remembered that the State French is a shareholder of the company).
To begin to clear up these unknowns, we will have to wait until March when the operation is expected to be closed and the new number 1 will be presented to clients in Spain.