The potential merger between Orange and MásMóvil will create a powerful telecommunications company with a large market share and infrastructure, surpassing Telefónica. However, this union presents a significant regulatory challenge: they will have to relinquish part of their 5G radio spectrum because, combined, their frequencies exceed the legal limit.
The 5G spectrum is divided into two main bands: the high frequency (3.5 GHz), which offers high speeds but limited indoor penetration, and the low frequency (700 MHz), which better covers rural and indoor areas. In the 2018 and 2021 auctions, Orange acquired 110 MHz in the high band, and MásMóvil holds another 80 MHz, thanks to prior purchases from operators such as Eurona and Neutra. Together, they total 190 MHz, whereas Spanish regulations limit operators to 120 MHz each. Therefore, they must cede at least 70 MHz, more than one-third of their combined spectrum.
There is no excess problem in the 700 MHz band since MásMóvil did not participate in the 2021 auction. The government and regulators must now decide what to do with those frequencies, potentially reallocating them to other operators to prevent them from remaining unused.
Two options are being considered for the 70 MHz to be freed up: distributing it among smaller operators to encourage competition, or among the three major players (Telefónica, Vodafone, and the future merged entity), who have greater investment capacity for network deployment.
The main candidates to benefit from these frequencies are Digi and Avatel. Digi, after acquiring Euskaltel, is the fifth-largest operator in Spain, with nearly 3 million customers and a low-cost offering. However, its margins are tight due to payments to Telefónica for using its networks. Avatel, on the other hand, has consolidated several smaller operators, especially in eastern Spain, and has half a million fiber customers and more than 200,000 own mobile lines. It recently also brought in Santander as a minority partner, with a joint valuation exceeding 1.5 billion euros.
A forthcoming auction for the 26 GHz millimeter-wave band, aimed at high-demand centers, is also pending. This could be opened to private companies to create their own networks. MásMóvil is expected not to participate, following the same line as with the 700 MHz band.
In conclusion, relinquishing part of the spectrum will be the first regulatory requirement for the Orange and MásMóvil merger. The European Commission will decide if further divestments are necessary to protect competition. The operators hope these limitations will be minimal to maximize synergies.
