By Foo Yun Chee
BRUSSELS (Reuters) -European Union antitrust regulators on Monday warned that Orange and MasMovil's 18.6-billion-euro ($20 billion) Spanish telecoms merger could reduce competition in Spain as they opened a full-scale investigation into the deal.
The case is seen as a test of whether the European Commission will continue to take a tough line on consolidation in the telecoms sector or eases its stance.
Orange, the second largest telecoms provider in Spain, and fourth-ranked MasMovil announced the deal in July 2022, triggering expectations of more mergers in the sector.
The EU competition enforcer, however, said it had major concerns about the proposed deal.
"The transaction would reduce the number of network operators in Spain, thereby eliminating an innovative and significant rival. This could lead to higher prices and lower quality of telecom services for customers," the Commission said in a statement.
"As result of the transaction, Orange and MasMovil would have the ability and incentive to restrict access of virtual operators to wholesale mobile network and wholesale fixed network access services," it said.
Orange said it would take the time and the opportunity to demonstrate the benefits of the deal to the Commission.
"This transaction is beneficial both for Spanish consumers and the telecom sector as it will ensure the sustainable roll out of 5G and fiber on a wider scale within a very competitive market," the company said in a statement.
Orange is expected to offer remedies, which could include giving rivals access to networks or asset sales, to address the concerns. The Commission set an Aug. 21 deadline for its decision.
Reuters reported last month that an EU probe was imminent.
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