France-based global telecommunications service provider, Orange SA ORAN recently received Jazztel Plc. shareholders' approval to acquire the latter. Jazztel is a leading provider of broadband services along with fixed-line and mobile phone services to enterprises and consumer markets in Spain. Last month, Orange had received the green signal from the Spanish Securities Commission (CNMV) for the deal. Notably, the European Union’s (EU) regulatory commission also provided a conditional approval for this deal.
Jazztel boasts around 1.4 million broadband and fixed-line connections along with 1.16 million mobile users. Hence, the deal will help Orange consolidate its position in the highly saturated Spanish telecom sphere. Orange is the second largest provider of fixed broadband services in Spain commanding around 15% of the country's broadband market. The total value of the deal is pegged at Euro 3.4 billion (approximately $3.8 billion).
As part of the conditional EU regulatory approval, Orange has decided to divest a portion of its fiber-to-the-home (FTTH) network covering 700,000-800,000 premises in major cities of Spain. The buyer of these networks will gain wholesale access to Jazztel's ADSL network for up to eight years for an unlimited number of subscribers. Moreover, if the buyer does not have access to any mobile network, it will be granted the right to use Orange’s 4G LTE network.
The EU regulatory body believes that the concessions offered by Orange may pave the way for the entry of a new player into the Spanish telecom industry. On the other hand, Orange will become a formidable player in Spain capable of taking on Telefonica SA TEF and Vodafone Group Plc. VOD. In a separate development, in Feb 2015, Orange had entered into a definitive agreement with BT Group Plc. BT to divest its U.K. wireless business EE which it jointly controls with Deutsche Telekom AG. Orange currently carries a Zacks Rank #2 (Buy).
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