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Orange Chief Executive Christel Heydemann appeared confident that the transaction to merge the Group's Spanish operations with those of MÁSMÓVIL can be completed in the first quarter of 2024, although she hinted that negotiations with European Union antitrust officials remain tense.
During Orange's earnings call for the third quarter of 2023 (Q3 FY23), Heydemann said the fact that the EU regulatory process is taking a long time is "not a negative sign, on the contrary. That's because we are very firm on the value we want this deal to create".
She indicated that Orange is taking a strict line in talks in order to achieve its goals, including expected synergies of €450m in the first full year after the formation of the joint venture. "We know exactly what the red lines are", she said.
However, she acknowledged that the process is taking longer than initially hoped:"It's a negotiation. So you need parties to agree in an environment where obviously there's pressure on both sides".
She added that Orange is still hoping to achieve regulatory clearance for the merger before the end of the year, enabling it to close the deal in the first three months of 2024.
Orange originally signed a merger agreement with rival operator MÁSMÓVIL in July 2022, with the aim of creating a 50:50 joint venture in Spain. The European Commission launched an "in-depth" and "wide-ranging" investigation into the proposed transaction, and in June this year sent a statement of objections to both Spanish operators. On 28 July, the Commission said it had stopped the clock on its review of the merger as it seeks additional information from the two parties.
Heydemann said the fact that Orange obtained a "stop the clock" means that the Commission "knows we are discussing in good faith to find remedies to the concerns that they expressed in the statement of objections". She stressed that these concerns did not impact the wholesale market, "and are focused only on retail services".
Heydemann also referenced the involvement of "potential remedy takers" in the negotiations, although she was unable to provide any detailed information as the discussions are confidential. "Obviously, we still need to come to an agreement on remedies" with the Commission, she added.
Digi Communications' Chief Executive Serghei Bulgac has already indicated it would be interested in buying assets that Orange and MÁSMÓVIL may be forced to offload as remedies required to achieve EU merger approval.
The operator has reportedly promised to invest €2bn in Spain if it is allowed access to the assets. Other operators to have expressed interest in acquiring the merger remedies are said to include Spanish altnets Avatel Telecom and Finetwork. Like Digi Spain, they both provide mobile services via wholesale agreements and are also building fibre networks.
During Orange Q3 earnings call Heydemann was also questioned about a potential consolidation of the telecoms market in France. While this has been a recurring theme over recent years, the topic has been back in the news because of reports that embattled French billionaire Patrick Drahi is mulling a sale of his stake in Orange domestic rival SFR (Altice France). This possible move is reported as being part of ongoing efforts to reduce debt at Altice.
According to local press reports, Drahi has made approaches through a banker to sound out Bouygues Telecom and Iliad-owned Free about a possible deal. Bloomberg reported that neither competitor has shown any interest in the proposal.
Heydemann, who had clearly been expecting a question on the subject, said Orange was not able to comment on the reports or on SFR in general. She also reiterated that Orange would not participate in any market consolidation in France because of its leading position there.
However, she did remark that it is "never good news when one of your competitors is going through some turbulence".
Posted In: ORAN
