Orange and MasMovil sign $19b merger deal in Spain

PARIS/MADRID, July 23 (Reuters): Orange and MasMovil have signed a binding agreement to combine operations in Spain in a deal valuing the merged entity at close to $19 billion, the two telecoms firms said in a statement on Saturday.

The merger creates a heavyweight spanning mobile and broadband, posing a challenge to top player Telefonica and analysts say possibly opening the way to similar alliances in markets such as Italy, Portugal and the UK.

The merger of the second and fourth largest telecoms operators respectively also leaves third-ranked Vodafone stranded, albeit the beneficiary of a more consolidated market that is expected to reduce competition and boost operators' profitability.

The tie-up is expected to test the European Commission's appetite for consolidation. It has previously opposed deals that reduce the number of players from four to three in major markets.

Spain's mobile market is a four-way fight with Telefonica's Movistar brand holding a 28.24 per cent share, Orange 22.91 per cent, Vodafone 22.26 per cent and MasMovil with 20.55 per cent, data from market regulator CNMC showed in March.

The Commission's response will also reveal whether it is willing to favour a market structure with fewer operators and potentially higher investments on infrastructure-as lobbied for by industry-or if it will stick to a consumer-centric stance marked by fierce competition and low prices.