The European Commission (EC) opened a detailed investigation into a proposed merger of Orange and Masmovil’s operations in Spain, citing preliminary concerns about higher consumer prices and a negative impact on the wholesale sector.

On announcing the move, the regulator outlined the findings of its preliminary look at the deal, which raised fears of higher prices and lower service quality resulting from having fewer operators in the market.

The EC noted its initial assessment found the tie-up would eliminate an “innovative and significant rival” in Spain.

It also raised the possibility the combined entity would have “the ability and incentive to restrict access of virtual operators to wholesale mobile network and wholesale fixed network access services”.

This, it claimed, could hamper the abilities of MVNOs and their fixed counterparts to compete, with the end result of raising consumer pricing.

EC EVP for competition policy Margrethe Vestager described Masmovil as “a successful challenger to Orange and other operators in recent years”.

“We want to ensure that Spanish consumers continue to benefit from affordable and high-quality telecom services, including from virtual operators that need competitive wholesale access to fixed and mobile networks in order to offer their services in retail telecom markets,” she added.

The pact between Masmovil and Orange to combine operations in the country followed regular media speculation on potential M&A activity in the market, and came during a sustained period where major operators bemoaned Spain’s high levels of competition.