By Jacques de Greling, Director, Corporate Ratings

With the private equity firms which own MásMovíl eager to exit Spain’s low-growth but comfortably profitable market, and Vodafone PLC unwilling to take on the role of consolidator, it has fallen to Orange to make the attempt.

However, as Stéphane Richard, Orange’s outgoing CEO, acknowledged in an investor call three weeks ago, the anti-trust framework in Brussels has not changed. Richard said arguments for in-market consolidation were now stronger as there are players in the market that did not exist five years ago. We note that MásMovíl is not in fact a new mobile operator but simply the new name of Yoigo which started in the Spanish market in 2006. 

Richard also added that the main problem for the telecom industry is self-censorship: if you don’t submit a project in Brussels, you don’t know if there is a change in the regulatory climate. Richard said the price to pay for triggering in-market consolidation in a market like Spain’s is the 12-18 months anti-trust process in Brussels, with all the associated uncertainties.

Orange’s decision to take on this burden seems to imply that Vodafone Spain was not willing to take a Vodafone-MásMovíl deal to Brussels for approval, much as the UK firm rejected an offer of in-market consolidation from Iliad SA in Italy only a month ago.

An important barometer of whether the European Commission is more or less willing to consider in-country telecoms consolidation without significant remedies will be the outcome of its appeal against a court decision to overturn the EC’s blocking of the merger of Hutchison’s and Telefónica’s operations in the UK. The verdict of the European Court of Justice is not expected for some months. 

For more on credit analysis on Europe’s telecoms sector, including BT Group, CETIN AS, Deutsche Telekom AG, Elisa Oyj, Proximus SA, Swisscom AG, Telefonica, TDF SAS, Telekom Austria AG, Tele2 AB, Telia Company AB, and Vodafone Group.

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