Orange Belgium has confirmed it's ready to take over the cable operator Voo, owned by Nethys and Brutele in respectively Wallonia and Brussels. If it's successful, the Belgian market would have two duopolies plus a strong challenger, meaning good news for especially Orange as well as Telenet.
A takeover of Voo is mainly a way for Orange to integrate vertically and improve its margins. Its operating costs will fall, but capex will increase, as owning a network requires more investment. Parent company Orange is apparently OK with this, even if it could cost a few billion euros. Voo does not disclose its results, but could be comparable to Telenet, which has a market capitalisation of EUR 6.3 billion.
Two duopolies with a challenger in Flanders
Orange would become a cable network operator in Wallonia and parts of Brussels, while remaining a wholesale customer on the Telenet network in the rest of Belgium. The situation would require further regulatory changes. Either Orange would no longer have access to Telenet's network, or Telenet gains access to the Voo/Orange network.
Telenet starting services on the Voo network would ensure symmetry, but it's questionable whether the company is even interested in becoming a retail provider on another company's network. More possible is a 'second Telenet' emerging in Wallonia if Orange is successful in acquiring Voo. Orange would no longer be a distant number three on the Belgian market, behind Proximus and Telenet. If the country abandoned its open cable regulation, a new dupoloy would emerge. Or more precisely, two duopolies: Proximus and Telenet in Flanders, and Proximus and Orange in Wallonia. This alone is reason enough to maintain wholesale cable access, so challengers can develop. This can be Orange in the north of the country and another player (theoretically Telenet, but far from certain) in the south. However, if no challenger emerges in the south, this could be a problem for regulators considering Orange's acquisition of Voo.
Telenet/Voo not to be excluded
Another possibility can't be excluded: that Telenet launches its own bid for Voo. This would create a nationwide cable operator and leave Orange still as a smaller number three, acting as challenger on the cable network. All three players would be active nationwide, but Orange would face low profitability due to its reliance on wholesale access. At the same time, Orange could avoid the extra investment costs, which means a neutral impact on cash flow.
The share prices of both Orange BE and Telenet responded positively to the news, while Proximus's stock moved little. This suggests the market is betting on a situation with two duopolies.
