In line with reports earlier this week, it has now been confirmed that European Union (EU) antitrust regulators have indeed decided to expand their investigation of Orange Group’s planned EUR3.4 billion (USD4.2 billion) acquisition of alternative Spanish broadband provider Jazz Telecom (Jazztel).
In a statement confirming the development, the European Commission (EC) noted that with both Orange Espana and Jazztel operating fixed telecoms networks, the proposed transaction would reduce the number of nationwide providers of such services from four to three. As such, and despite it being noted that the merged entity ‘would not be in a dominant position’, the EC said it had concerns that the deal would lead to ‘a significant loss of competitive pressure for fixed internet access services and fixed-mobile multiple play offers’.
Outlining the findings of its initial investigation into the planned acquisition, the EC said there was a particular concern over the reduction of competition in the retail market for fixed internet access, arguing that both companies were ‘important competitive forces with a stronger influence on the competitive dynamics in these markets than suggested by their market shares’. Such a situation, it added, raised concerns that the deal could ‘change the merged entity’s incentive to exert significant competitive pressure on the remaining two nationwide competitors, namely incumbent operator Telefonica and Vodafone (who acquired cable operator ONO earlier in 2014)’.
Having opened its in-depth investigation the EC now has 90 working days – until 24 April 2015 – to make a decision on the matter. In terms of specific aims for the extended study, it has said it will look to determine whether its competition concerns are confirmed or not, while also analysing the impact of the transaction on the fibre-to-the-home (FTTH) deployment currently carried out by Orange Espana and Jazztel and in particular whether it could reduce their FTTH footprint as compared to a stand-alone scenario.
Meanwhile, the EC did also confirm that Orange Group had pre-emptively sought to quell competition concerns by submitting commitments on 13 November 2014. However, the Commission said it ‘considered that these commitments were insufficient to clearly dispel its serious doubts as to the compatibility of the transaction with the EU Merger Regulation and therefore decided not to test them with market participants’.