French telecom giant, Orange‘s, proposed $19bn merger with Spanish telecom company Masmovil Ibercom is under threat of being blocked following an intervention by European Union merger watchdogs.
Both companies are set to be handed a list of competition concerns surrounding the desired merger which need addressing in order to progress, Bloomberg reported.
The news comes after the watchdog launched an investigation in April, warning that the proposed merger could potentially reduce the total number of network operators in Spain.
Orange is currently the largest telecom company in the country, while Masmovil Ibercom is the fourth largest.
“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,” the EU watchdog said in a statement.
Adding: “This could reduce the ability of such operators to compete, and in turn lead to higher prices and lower quality of services for end customers in Spain.”
Orange shares fell up to 1.6% following the news on Monday (19 June).
Spain is a hotbed for telecom competition, largely due to Spanish law forcing large operators to share their networks at regulated prices with any other company that requests it.
This means that new telecom firms can easily make a place for themselves at the lower end of the market.
This forces large companies like Orange and Telefonica SA to release their own low-cost option to keep up with competition, much of the time having to offer services for half the price.
Major telecom companies in Spain have been experiencing declines in revenue over the past decade.
The EU merger watchdog currently has until 4 September to make a final decision on the merger.