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Orange aims to add some extra glass & wire to its Spanish holdings with an offer for Jazztel

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via Flickr © Images_of_Money (CC BY 2.0)

French telecoms group Orange has offered of €3.4 billion in cash for Spanish carrier Jazztel. If all goes to plan the move will see Orange move into position as one of the big three multi-players in the Spanish market and in many ways will be a direct consequence of Vodafone’s buying Spain’s Ono last year.

Both moves were/are designed to bring more of the essential fixed line component into the mix to enable these two players to compete with Telefonica (which is the premier multi-player in Spain).

According to Stefan Zehle, CEO of Coleago Consulting, it’s a Europe- if not world-wide track. “Everyone is trying to build a triple play and the process is intensifying.”  One reason is the realisation that owning a big fat pipe into the home is going to be crucial.  “From the mobile perspective the ability to offload traffic inside buildings (both business and residential) is already key.”  Generally having both mobile and broadband access is will enable the winning carriers (or cable companies) to capture homes and premises with a compelling bundle of services, including entertainment.

If Orange gets hold of Jazztel it stands to enlarge its Spanish broadband market share by 14 per cent with 1.5 million broadband subscribers.

Analysts are expecting the Spanish market to ‘repair’ itself if and as the consolidation put in train by both Vodafone and Orange takes effect. In other words the lack of competition will enable the consolidated entities to push up prices to the detriment of consumers and other players in the ecosystem.. should the regulators allow it.

Under competition law (properly applied) the merger should by rights be disallowed unless there are remedies to prevent consumers being disadvantaged. So far however, as the experience in Austria (where prices post-consolidation have soared) seems to show, remedies such as mandating MVNOs in the mobile market, don’t actually work that well (with Ireland we’re yet to see).

In this case the regulatory outlook is slightly confused by the joint involvement of the Spanish Securities Commission (which you’d expect) and the UK Takeover Panel (which you wouldn’t). The latter is in the frame because Jazztel is registered in the UK.

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