PARIS, FRANCE: ORANGE and MASMOVIL (LORCA JVCO) have entered into exclusive discussions to combine their businesses in Spain.

The combination would take the form of a 50-50 Joint Venture, co-controlled by ORANGE and MASMOVIL (LORCA JVCO) with a combined enterprise valuation of €19.6Bn.

Valuations are attractive for both businesses, with ORANGE Spain’s enterprise value at €8.1 billion (7.5x 2022E EBITDAaL and 38.7x 2022E EBITDAaL – eCapex) and MASMOVIL’s (which includes the acquisition of EUSKALTEL) enterprise value at €11.5 billion (9.9x 2022E EBITDAaL and 17.8x 2022E EBITDAaL – eCapex).

ORANGE and LORCA JVCO would benefit from equal governance rights in the combined entity. Accordingly, neither ORANGE nor LORCA JVCO will consolidate the combined operations.

The agreement between the parties includes (i) a right to trigger an IPO under certain conditions for both parties and (ii) a path-to-control right for ORANGE to consolidate the combined entity in the case of an IPO. ORANGE would neither be forced to exit nor to exercise these options.

The Joint Venture would bring together the assets, capabilities and teams of the two companies in Spain, building on highly complementary business models as well as an existing successful collaboration, to serve 4.0+3.13 million fixed customers (of which 3.0+2.6 convergent), 11.5+8.7 contract mobile customers and close to 1.5 million TV customers.

The combined entity would become a stronger market player with revenues of over €7.5 billion, EBITDAaL over €2.2 billion.

With a comprehensive and complementary portfolio of brands, the Joint Venture would provide Spanish consumers and businesses with competitive and differentiated value propositions to serve the needs of all market segments, with high quality connectivity, an excellent customer experience and a comprehensive portfolio of innovative services in the challenging digital landscape.

This Joint Venture is expected to generate relevant synergies which should reach an annual run rate in excess of €450m from the third year post closing onwards.

The transaction is expected to be signed by the second quarter of 2022 and should close by Q2 2023, subject notably to approval from the relevant administrative, competition and regulatory authorities.

Stéphane Richard, Chairman & CEO of ORANGE, commented: “I look forward to creating this joint-venture with MASMOVIL, building on our existing successful collaboration, to become a stronger player capable of making the investments required to develop the Spanish market. I know I can count on Jean-François Fallacher and the entire ORANGE Spain teams for their full mobilization until the closing in order to make this deal a success.”

Meinrad Spenger, CEO of MASMOVIL, commented: “To assure leading telecom infrastructure in 5G and FTTH as well as outstanding service in Spain, we need strong operators with sustainable business models. The combination of ORANGE and MASMOVIL would be beneficial for the consumers, the telecom sector and the Spanish society as a whole.”

Lazard acted as financial advisor to ORANGE. Goldman Sachs Bank Europe SE acted as financial advisor to MASMOVIL and BNP Paribas acted as debt advisor to MASMOVIL.

Orange is one of the world’s leading telecommunications operators with sales of 42.5 billion euros in 2021 and 140,000 employees worldwide at 31 December 2021, including 78,000 employees in France. www.orange.com

MASMOVIL Group is the operator that has led the growth in Spain for the last years which offers fixed, Internet broadband, Mobile, tv and new services as 100% clean energy, e-health, home security and personal finance services for residential, businesses and wholesale. www.grupomasmovil.com