ORANGE and MASMOVIL sign an agreement to combine their activities in Spain

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Orange

Press release
Paris, July 23, 2022

ORANGE and MASMOVIL sign an agreement to combine their activities in Spain

  • Following the period of exclusive negotiations that began on March 8e 2022, ORANGE and MASMOVIL (LORCA JVCO) signed a binding agreement to combine their activities in Spain1.

  • The transaction involves an enterprise value of 18.6 billion euros, 7.8 billion euros for ORANGE Spain and 10.9 billion euros for MASMOVIL.

  • The transaction is subject to the approval of antitrust authorities and other competent administrative authorities and is expected to be finalized during the second half of 2023 at the latest.

As indicated in the prior announcement, the combination of the activities of ORANGE Spain and MASMOVIL would take the form of a 50-50 joint venture co-controlled by ORANGE and MASMOVIL (LORCA JVCO), with equal governance rights in the combined entity. The agreement between the parties includes a right to trigger an IPO under certain conditions for both parties after a defined period and, in such event, an option for ORANGE to take control of the combined entity at the price of l ‘Initial Public Offering.

The joint venture between MASMOVIL and ORANGE will create a sustainable player with the financial capacity and scale to continue investing to foster the future of infrastructure competition in Spain for the benefit of consumers and businesses.

A joint venture between the two complementary businesses would lead to significant efficiencies, allowing the combined company to accelerate investments in FTTH and 5G that will benefit Spanish customers.

As part of the final agreement, the enterprise value of ORANGE Spain is set at €7.8 billion (7.2x EBITDAaL 2022E and 37.1x EBITDAaL 2022E – eCapex)2 and MASMOVIL (which includes the acquisition of EUSKALTEL) at €10.9 billion (8.7x EBITDAaL 2022E and 14.9x EBITDAaL 2022E – eCapex)2.

The due diligence conducted since March shows potential synergies in excess of €450 million per year to be achieved by the fourth year after closing.

The transaction is supported by a €6.6 billion non-recourse debt package which will fund, among other things, a €5.85 billion upfront payment to ORANGE Group and MASMOVIL shareholders. This distribution to shareholders will be asymmetrical because it also incorporates an equalization payment in favor of ORANGE to reflect the different levels of indebtedness of the two autonomous companies. This debt package is mainly composed of bank debt, provided by a large pool of banks. MASMOVIL’s existing debt will remain in place. Post-closing, the financial policy agreed between ORANGE and LORCA JVCO includes a leverage target of 3.5x the net debt/EBITDA ratio to facilitate an IPO of the joint venture in the medium term.

The transaction is subject to the approval of antitrust authorities and other competent administrative authorities and is expected to be finalized during the second half of 2023 at the latest. Until these approvals and closing conditions are satisfied, the two companies will continue to operate independently.

Christel Heydemann, CEO of ORANGE, said: I am very happy to announce the conclusion of these negotiations today. This agreement paves the way for the creation of a common company which brings together the forces of ORANGE and MASMOVIL into a single stronger operator that will enable investments in 5G and Fiber, benefit toing customers throughout Spain. I firmly believe that the creation of this new company is of fundamental importance for the Group, the Spanish telecom market and for our clients.

Meinrad Spenger, CEO of MASMOVIL, commented: This is a great day for Spanish consumers as good as for our stakeholders. Jwith ORANGEwe plan to form a strong operator with a sustainable business development model and ability to invest in world-class infrastructure, technology and Talent. We anticipate this will be stimulate competition, digitization and innovation in the spanish market.”

More information
See presentation on orange.com (https://newsroom.orange.com/?lang=fr) for key facts and figures about this operation.

DISCLAIMER
This press release contains forward-looking statements, assumptions, estimates and other statements or expectations that involve risks and uncertainties, including references regarding expected future savings, synergies, as well as its future positioning in the market. , financial structure, growth and profitability, which could cause actual results to differ materially from those contained in such estimates and forward-looking statements.
Many of these risks and uncertainties relate to factors that cannot be controlled or estimated with certainty, such as future market conditions, approvals to be granted by the relevant competent authorities or the responses of investors or other actors. of the market and there can be no assurance that the foreseen events will occur or that the stated objectives will actually be achieved. Forward-looking statements speak only as of the date they are made. Except as required by law, there is no obligation to update forward-looking statements in light of new information or future developments.

About Orange
Orange is one of the world’s leading telecommunications operators with revenue of 42.5 billion euros in 2021 and 137,000 employees worldwide as of March 31, 2022, including 76,000 employees in France. The Group has a total customer base of 278 million customers worldwide as of March 31, 2022, including 232 million mobile customers and 24 million fixed broadband customers. The Group is present in 26 countries. Orange is also one of the world’s leading providers of IT and telecommunications services to multinational companies under the Orange Business Services brand. In December 2019, the Group presented its new “Engage 2025” strategic plan, which, guided by social and environmental responsibility, aims to reinvent its operator model. While accelerating in growth areas and placing data and AI at the heart of its innovation model, the Group will be an attractive and responsible employer, suited to emerging professions.
Orange is listed on Euronext Paris (symbol ORA) and on the New York Stock Exchange (symbol ORAN).
For more information on the internet and on your mobile: www.orange.com, www.orange-business.com and the Orange News app or follow us on Twitter: @orangegrouppr.
Orange and any other Orange product or service name included herein are trademarks of Orange or Orange Brand Services Limited.

About MASMOVIL Group
MASMOVIL Group is the operator that has led the growth in Spain in recent years. It offers fixed, broadband Internet, mobile, TV and new services such as 100% green energy, e-health, home security and personal finance services for individuals and businesses. and wholesale through its main brands: Yoigo, MASMOVIL, Pepephone, Lebara, Llamaya, Lycamobile and Virgin telco and the regional brands Euskaltel, R, Telecable, Embou and Guuk.
In Portugal, MASMOVIL owns the Nowo brand, which offers fixed and mobile services for residential customers.
The Group has FTTH fixed networks and 3G, 4G and 5G mobile network infrastructures. It has coverage of more than 27 million households available in fiber and 18 million with ADSL, and its 4G/5G mobile network covers 98.5% of the Spanish population.
MASMOVIL has launched its 5G services covering more than 900 cities in Spanish territory. The Group has almost 15 million mobile and fixed services in Spain after the acquisition of Euskaltel.
MASMOVIL achieved net zero carbon emissions in 2020, positioning itself as the first telecom operator in Europe to achieve such a goal and the lowest absolute residual emissions. Moreover, it is the first telecommunications operator in Europe to become a B-Corp Company.
MASMOVIL has been participated by Cinven, KKR and Providence Equity Partners since November 2020 with the aim of accelerating the Group’s investment strategy.

Follow us:
MASMOVIL Group website: https://www.grupomasmovil.com/
Twitter: https://twitter.com/grupomasmovil

Press contacts:
ORANGE Group – Tom Wright; [email protected]; +33 6 78 91 35 11
ORANGE Spain – Beatriz Valverde; [email protected]; +34 616 093 913
MASMOVIL Group – Fernando Castro; [email protected]; +34 656 160 378

1 The contemplated transaction does not notably include TOTEM Spain and MASMOVIL Portugal.
2 multiple ORANGE proformas, after TOTEM carve-out. Pro forma multiples of MASMOVIL including the acquisition of EUSKALTEL (based on EUSKALTEL run rate synergies).

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