EU Approves Orange's Acquisition of Jazztel

BRUSSELS—Orange SA has secured European Union approval for its acquisition of Spanish broadband and cellphone operator Jazztel PLC after agreeing to a package of divestments and network-sharing agreements that would help launch a new telecoms operator in Spain.

The €3.4 billion ($3.87 billion) merger had been closely watched to see how the EU's new executive will approach future mergers in Europe's rapidly-consolidating telecoms sector. It will almost double Orange's market share in broadband Internet access in Spain, and reduce the number of fixed-network telecom players operating across the country to three, from four.

The deal will enable Orange to leapfrog Vodafone Group PLC to become Spain's second-largest provider of those services, with a market share of around 30%. Both companies trail Telefónica SA, which holds around 43% of the market.

The European Commission, the bloc's top antitrust authority, opened an in-depth investigation in December, warning the deal could mean Spanish consumers would face higher prices for fixed Internet access. Regulators suspended their investigation twice as they sought to establish whether Spanish consumers would suffer from the reduced competition.

But the commission said Tuesday that a package of remedies offered up by Orange had assuaged its fears. The French company agreed to divest an optical fiber network in Spain and grant the purchaser access to its copper and mobile networks, including 4G services.

"The remedies taken as a whole ensure that a fourth nationwide operator can enter the Spanish market and be able to compete effectively in markets involving fixed Internet access services," the commission said in a statement.

European operators have been lobbying for years to be able to merge, arguing that such moves would help them boost necessary investments in their networks. Telecom executives have been encouraged by the pro-investment stance of the EU's new Brussels-based executive team, which took office in November. Orange Chief Executive Stephane Richard said last November the commission appeared to be more open to consolidation but that the review of its Jazztel deal would be the first test case for how the commission approaches such mergers.

The bloc's former antitrust chief Joaquín Almunia waved through a number of big telecom deals, notably Telefonica's €8.6 billion purchase of KPN's German mobile operator E-Plus.

But Margrethe Vestager, the bloc's new antitrust chief, has warned repeatedly that she won't allow large mergers to take place at the expense of consumers.

In a statement Tuesday, Ms. Vestager said it had been "very important" to ensure that consumers in Spain wouldn't suffer from higher prices.

"With the remedies in this merger a new player may enter the market and compete as strongly as Orange and Jazztel do today," Ms. Vestager said.

Write to Tom Fairless at [e-mail]

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