Achieving healthy competition in mobile services is a fine balance

Arguments for and against mergers and acquisitions in Europe's mobile sector have dominated headlines of late, as the region's telecoms sheriffs clash with industry leaders over whether, and to what extent, in-market and cross-border mergers should be permitted.

Fears by regulators that mergers would lead to higher prices for consumers have already led to the failure of one major deal: the proposed merger of the mobile units owned by TeliaSonera and Telenor in Denmark.

Indeed, some worry that consolidation in Europe could now come to an abrupt halt, affecting planned deals such as the proposals by CK Hutchison to buy O2 in the UK and Wind in Italy and Liberty Global's bid for Base Belgium.

"I'm flabbergasted by the Danish decision -- simply just don't understand it," said Roger Wilkinson of Newton Investment Management, succinctly expressing the feelings of many at the FT-ETNO summit earlier in October.

Against this background, it was interesting to read an interview this week with the new director general of Israel's Ministry of Communications. Shlomo Filber, who was appointed in June by Prime Minister Benjamin Netanyahu and told Bloomberg that mobile prices are now too low and there are too many operators on the market.

Indeed, Filber said the competition introduced to the market went too far: Israeli mobile operators "are selling a monthly line for around 35 shekels. This is a price that is not economical," Filber told Bloomberg. "OECD prices are around 20 euros [86 shekels]."

The fact that a person from the regulatory side of the fence is complaining about low prices serves to emphasise the extent to which prices have fallen in this market.

Certainly, industry players have long complained about and suffered from the effect that additional competition has on prices -- you just have to look at France to see how Free Mobile turned the market upside down.

However, whether that means that France should now consolidate back to three mobile players is a difficult question to answer, and there are signs that the market is starting to recover. But as regulators revolt against too much consolidation, Israel perhaps serves as a timely example that things can also swing too far the other way -- although consumers at least will be smiling.--Anne

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