EU opens probe into Orange's Jazztel deal

Diminishing competition could result in higher prices for consumers, says antitrust watchdog.

The European Commission has confirmed it has opened an in-depth investigation into Orange Spain's proposed €3.4bn deal for broadband provider Jazztel.

The acquisition, first announced in September this year, would see Orange leapfrog Vodafone to become the second biggest supplier of broadband in Spain, behind market leader Telefonica.

The EU's worry is that Orange's increased triple-play offerings would lead to higher prices for consumers, due to the diminishing competition in the market. Telefonica already offers broadband, telephone and mobile services, as Vodafone is moving into that space as well thanks to its deal for Ono.

In a statement the EU said: "The proposed transaction would reduce the number of nationwide providers of fixed telecommunications services in Spain from four to three. 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 loss of Jazztel could potentially lead to price increases, the statement added.

Orange already attempted to address EU concerns back in November, but the Commission ruled its commitments were "insufficient to clearly dispel its serious doubts as to the compatibility of the transaction," resulting in this new, in-depth investigation. The Commission now has until 24 April, 2015 to make its final decision.

In a statement, Orange said it still expects the deal to go through. "The Orange Group continues proceedings for the acquisition of Jazztel and reaffirms its confidence in the favourable outcome of this deal," the statement said.

The theme of consolidation running through the Spanish telecoms market is reflective of a wider European theme. Consumers are increasingly attracted to packages that combine television, internet access and mobile services as they are often cheaper than buying each individually.

Telefonica's German subsidiary acquired mobile operator E-Plus for €8.6bn, while O2 Ireland was sold to Three for €850m. More recently, BT confirmed it was in early stage talks to acquire either Telefonica's O2 subsidiary or EE, so it could add a mobile option to its existing broadband, telephony and television packages.