Orange S.A. and MASMOVIL (LORCA JVCO) announced that they have entered into exclusive discussions to combine their businesses in Spain 1. The combination would take the form of a 50-50 Joint Venture, co-controlled by ORANGE and MASMOVIL (LORCA JVCO) with a combined enterprise valuation of 19.6Bn. Valuations are attractive for both businesses, with ORANGE Spain's enterprise value at 8.1 billion (7.5x 2022E EBITDAaL and 38.7x 2022E EBITDAaL - eCapex) 2 and MASMOVIL's (which includes the acquisition of EUSKALTEL) enterprise value at 11.5 billion (9.9x 2022E EBITDAaL and 17.8x 2022E EBITDAaL - eCapex)2. ORANGE and LORCA JVCO would benefit from equal governance rights in the combined entity. Accordingly, neither ORANGE nor LORCA JVCO will consolidate the combined operations.

The agreement between the parties includes (i) a right to trigger an IPO under certain conditions for both parties and (ii) a path-to-control right for ORANGE to consolidate the combined entity in the case of an IPO. ORANGE would neither be forced to exit nor to exercise these options. The Joint Venture would bring together the assets, capabilities and teams of the two companies in Spain, building on highly complementary business models as well as an existing successful collaboration, to serve 4.0+3.1 3 million fixed customers (of which 3.0+2.6 convergent), 11.5+8.7 contract mobile customers and close to 1.5 million TV customers.

The Joint Venture would own network assets that provide it with a competitive edge in the market including: A state-of-the-art, nationwide FTTH network reaching over 16m homes; A mobile network with full national coverage, serving large volumes of traffic in the Spanish market.