EU Suspends Review of Orange-Jazztel Deal -- Update

By Tom Fairless and Ruth Bender 

BRUSSELS--The European Union has halted for a second time its antitrust probe into Orange SA's EUR3.4 billion ($3.62 billion) acquisition of Spanish broadband and cellphone operator Jazztel SA, as regulators seek to establish whether the merger will drive up consumer prices in Spain.

The move injects fresh uncertainty into a deal that would almost double Orange's market share in broadband Internet access in Spain, leapfrogging Vodafone Group PLC to become the country's second-largest provider in that segment. Both companies trail the market leader, Telefónica SA.

The merger is being closely watched by investors as a test case for how the EU's new antitrust chief, Margrethe Vestager, will approach deals in Europe's rapidly-consolidating telecoms sector.

A spokeswoman for Ms. Vestager said Thursday that "the clock has been stopped" on the Orange-Jazztel deal since March 4.

"Information is missing from the file that we require before resuming the investigation," the spokeswoman said. The commission previously suspended the probe for a week in January.

Orange couldn't immediately comment. Spain is Orange's second-largest market, accounting for around 10% of the group's revenue.

When the commission opened the probe in December, it expressed concern that the deal would lead to higher prices for Spanish customers of fixed Internet and fixed-mobile triple play deals.

Orange submitted fresh remedies aimed at addressing those concerns on March 6, according to a statement posted online. The company also presented its arguments at an oral hearing organized by the commission in Brussels on Monday, two people familiar with the matter said. Such hearings allow companies to make their case to a broader audience.

Ms. Vestager's predecessor, Joaquín Almunia, was widely regarded as supportive of telecoms mergers, after he approved deals that reduced the number of mobile operators in Germany and Ireland from four to three.

The EU's new executive team, led by former Luxembourg prime minister Jean-Claude Juncker, entered office in November with a pledge to create a digital single market by breaking down national silos in telecoms regulation and competition law.

In a speech earlier this month, though, Ms. Vestager warned that she wouldn't allow large mergers to take place at the expense of consumers.

"The argument goes that we need to protect companies, to help them become bigger companies, otherwise they can't take on international rivals," she said.

"I'm not convinced about these arguments," she said. "[Mergers] should not happen at the expense of consumers."

Write to Tom Fairless at [e-mail] and Ruth Bender at [e-mail]

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