(Bloomberg) -- Digi Communications NV has reached a preliminary deal to acquire assets from Orange SA and Masmovil Ibercom SA, potentially clearing the path for its two bigger rivals’ €18.7 billion ($20.5 billion) merger, according to people familiar with the matter.
The agreement — which will help Orange and Masmovil meet European regulators’ demands on their combination in Spain — could be signed by the end of the year, capping months of negotiations, said one of the people, who asked not to be identified because the discussions are private. The preliminary agreement is non-binding, the person said. No final decision has been made and companies could still decide not to go ahead with the deal.
The European Commission had expressed concerns that Orange and Masmovil’s combination would have too much of a negative impact on competition. The deal is expected to create a new dominant telecommunications company in Spain and reduce the number of major mobile operators to three from four. To address this, the commission has encouraged the companies to sell assets including some of their mobile spectrum licenses.
Digi, which offers mobile and broadband services through wholesale agreements, was the commission’s preferred buyer, people familiar with the matter said in September. Regulators had initially set a deadline to make a decision for Aug. 21, though they paused the process in late July, saying additional information was needed. The proposed merger is being closely followed across the industry as it will offer signs about how the European regulator views in-market consolidation.
Press officers for Orange, Digi and Masmovil declined to comment.
Read More: Orange, Masmovil to Create $21 Billion Spanish Telecom Unit
Orange shares fell 0.2% to €11.28 at 4:25 p.m. in Paris. Digi rose 0.5% to 40.70 leu in Bucharest.
--With assistance from Benoit Berthelot.
(Updates to add stock moves in last paragraph. A previous version of this story corrected the spelling of Digi Communications in first paragraph.)
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