insights

The transition to a new Telco sector

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Telecoms & High-tech

Impact of the merger of MásMóvil with Orange

Helmets, music and blank document. I was looking forward to writing about this exciting moment in the telecommunications sector in Spain, beyond the consequences that can be glimpsed.

I have a Telegram group with old and magnificent friends – the one who has been in this industry for the least is a quarter of a century – in which we comment, as in a Sanhedrin, every movement that takes place, or we believe will take place in the sector. And the latest move did not come as much of a surprise. I don’t know if it is because it already seems like a “déjà vu of times gone by, but we knew it was going to happen.

The much speculated MásMóvil and Orange merger has arrived and, beyond the fact that it will fill the pockets of shareholders -let’s leave aside the figures, so as not to get dizzy-, it offers a new outlook for customers, employees and supplier companies in the sectorwho will receive a contraction of certain types of business, associated with the consolidation that was so urgently demandedThe company’s own operators as well as those in Europe.

But, let us be and think positive, for, as with all changes, there will be upheaval and new opportunities will arise where we can help. Yes, it is a mature sector that has finally taken the long-awaited step of consolidating the Spanish market, in order to have a much less tense commercial pressure than we have had in recent years.

 

The merger

 

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After this merger, which is likely to be a purchase in a couple of years, we will be talking about a company that will manage more than 30 million B2C business lines. In addition, the corresponding B2B business has been growing steadily, thanks to Orange’s good performance in recent times. In addition to an interesting and consolidated part of this business, inherited from the acquisition of Euskaltel by MásMóvil (which is still perceived as recent).

This event will lead to a simplification of the commercial offer. Although it is still a year away, the more than ten existing brands will be reduced. It should be recalled that Orange had already recently undertaken a simplification process in its number of brands, reducing them to three: Orange for premium customers, Jazztel for “middle class subscribers” and Simyo for the Low-Cost segment.

In addition, it will be necessary to transform and integrate the result of the multiple acquisitions that MásMóvil has been making over the years, both commercially and technologically.

These integrations could open up very interesting opportunities in the areas of homogenization and consolidation of networks, services, applications and business processes. Thus, a very interesting space will be established for companies like Grupo Oesía with a very contrasted background, experience and solutions in the sector and in processes of consolidation produced previously.

 

Remedies

We must bear in mind that this consolidation will result in many duplicate assets and, as a consequence, the famous “remedies”. Butwhat are remedies? Simplified, these are remedies and obligations imposed by the National Markets and Competition Commission (CNMC) and the European Commission to ensure competitive conditions in the market. It means that this consolidation, simplification and divestment is channeled to a third party, which could be a new entrant, serving as a leverage.

This is where names such as Avatel, Digi, Adamo or Finetwork appear. Does this story ring a bell? It probably does. It seems as if it were a long echo. Well, the same thing happened after the purchase of Jazztel by Orange with MásMóvil, which managed to keep these assets (720,000 homes transferred) and lay the foundations of a business plan that, look how far it has come… It’s hard to imagine, but that’s how it happened. Call me nostalgic, but I find it even romantic.

 

What about the rest of the operators?

But what about the rest of the more established, pedigree operators? What effect will it have on end users of companies such as Movistar and Vodafone? Well, there will be lights and shadows.

In the residential market, Movistar will continue to be the benchmark in terms of revenues and fixed-line customers. However, the joint venture between MásMóvil and Orange will be responsible for broadband and mobile customers. However, the good news for the blue operator is that this new scenario will almost certainly entail a change in regulation and changes in the wholesale market.

Vodafone, which many rumors pointed to being the protagonist along with MásMóvil in the operation -especially in the middle of last year-, has been left out of the equation. However, although it may seem that all these facts do not favor it in the least, they will allow it to consolidate its position as the third operator in the market, with a more alleviated commercial and competitive pressure, giving it some breathing space to rethink its next steps.

And at this point, it seems that history repeats itself over and over again. We may be talking in a few years’ time about Digi – to give a perfectly plausible example – merging, integrating or acquiring another company and starting all over again. In the meantime, we will continue to try to add value in this sector which, regardless of the maturity and consolidation it has reached, has always been characterized by its exciting predisposition to change.

Juan Martínez Cortés, Managing Director Telco & High Tech Sector

Oesía Group