European Commission to investigate Orange's proposed acquisition of Jazztel

In Spain, Orange operates mobile and fixed telecommunications networks while Jazztel is mainly active in Spain. It operates a fixed telecommunications network and offers mobile telecommunications services on Orange's network, the Commission said.

According to the Commission, the proposed transaction would reduce the number of nationwide providers of fixed telecommunications services in Spain from four to three. The Commission said that while the merged entity “would not be in a dominant position, the Commission has concerns that the proposed transaction may lead to a significant loss of competitive pressure for fixed internet access services and fixed-mobile multiple play offers”.

The Commission said: “The loss of Jazztel as an important competitive force could lead to price increases for these services for customers in Spain.”

Both Jazztel and Orange are “important competitive forces with a stronger influence on the competitive dynamics in these markets than suggested by their market shares”, the Commission said. The Commission said it has concerns that the transaction would “change the merged entity's incentive to exert significant competitive pressure on the remaining two nationwide competitors”, Telefonica and Vodafone, which acquired cable operator ONO earlier this year.

The Commission said its investigation will “also analyse the impact of the transaction on the fibre-to-the-home (FttH) deployment currently carried out by Orange and Jazztel and in particular whether it could reduce their FttH footprint as compared to a stand-alone scenario”.

The proposed acquisition was notified to the Commission last October. The Commission said the Spanish Competition Authority asked for a referral of the case in November under Article 9 of the EU Merger Regulation. This referral request is pending, the Commission said.

According to the Commission, Orange submitted “commitments” on 13 November to “address the competition concerns”. However, the Commission said it considered the 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”.

The Commission announced its investigation on 4 December but said the move did not “prejudge the outcome of the investigation”. The Commission has until 24 April 2015 to take a decision.