The USD 19 billion merger of the two Spanish telecoms units Orange and MasMovil is facing a major antitrust investigation by the EU. The merger between the country's second and fourth largest operators is the first major deal since 2016, when the European Commission banned CK Hutchison from taking over Telefonica's O2 mobile unit in the UK for US$12.6 billion.

Since last year, Orange and MasMovil have been in exclusive negotiations to merge their Spanish operations into a joint venture worth €19.6 billion. Under this telecoms deal, Orange would be valued at €8.1 billion and MasMovil at €11.5 billion, resulting in combined revenues in excess of €7.5 billion and EBITDA profits in excess of €2.2 billion. Telecom executives have stepped up consolidation efforts in countries with four or more players in recent years as excessive competition and cost pressures dampen investment. The European telecoms industry is highly fragmented and has suffered from low returns for several years.

Of the six largest telecom companies in Europe - Deutsche Telekom AG, BT Group PLC, Orange SA, Vodafone Group PLC, Telefónica SA and Liberty Global PLC - half of them will see negative five-year compound annual revenue growth rates in fiscal 2021. Liberty Global posted the steepest negative growth rate at -5.6%, closely followed by Telefónica at -5.4%.

The European Union Competition Authority confirmed that its preliminary investigation is still ongoing, while Orange refrained from commenting on the matter. In addition, the Commission is expected to reject the Spanish antitrust authority's request to take control of the case. Brussels has postponed its verdict until 3 April to allow further review of the deal.

"Legislation and regulation have been a significant barrier to mergers and acquisitions in recent years, with several major deals blocked or significantly delayed due to competition and consumer protection concerns."

-Jan Kudlak, TMT Deloitte Leader