Pranvera Kellezi, Nov 11, 2015
“There is no magic number,” stated the European Commissioner Margrethe Vestager in early October of this year. The statement followed the withdrawal of the merger planned by Telenor and TeliaSonera, after the European Commission objected, which would have merged the second and third largest Danish mobile operators and reduced the number of mobile network operators (“MNOs”) to three. It was also a response to the calls for consolidation in the mobile telecom sector and the argument that markets with four mobile operators could not keep up with investments. While four is a must for some regulators, “three is the magic number,” according to the industry.
A few years ago, the number “three” seemed to have magical powers, this time for the Swiss Competition Commission who blocked the merger between the second and the third largest mobile operators in 2010, which would have created a MNO duopoly. Switzerland does not have the luxury of having four mobile network operators; the same investment imperative was raised by telecom companies to justify a sustainable telecom market with only two players. This shows that after ongoing consolidation toward three MNOs, the industry would put forward the same arguments for a sustainable “magical duopoly” case in Europe.
Competition is not about numbers, but rather it is about effective competition at the retail level. Yet, numbers count for the assessment of anticompetitive effects and remedies, since merger control focuses on structure, the loss of competition prevailing before the merger, and replacement of that loss. When one competitor disappears, the remedies somehow have to replace its impact. Even the absorption of the smallest competitor may change market equilibrium, since such small players are often those that compete aggressively on the market to gain scale (the “mavericks”) and disrupt coordination.
But numbers are not the only factor taken into account; each merger assessment is case-specific, meaning specific to the conditions prevailing in the national market. Competition authorities have to deal not only with increased concentration and the risk of coordination, but also with the consequences of the integration of broadband and fixed telephony as well as bundling of services (triple or quadruple offers).
The assessment of telecom mergers follows a classical analysis of the merger’s impact on market shares and market concentration, and on the loss of competition compared to the situation before the merger, and, therefore, the ability of the new entity to raise prices or lower output and quality. Cost savings and investments play a role in the assessment of ability of efficiency gains to offset the loss of competition.
Full Links
KelleziNov 151
