EC competition head rejects calls for changes to aid telecom consolidation

The European Commission's (EC) competition chief rejected calls from politicians for changes to current merger rules for the telecoms sector, saying such amendments would not create the truly single telecoms market that the region needs.

Joaquin Almunia, European Commission vice president for competition

Joaquin Almunia, EC vice president for competition policy

Joaquin Almunia, EC vice president for competition policy, blamed national rules for preventing European companies competing on a regional level, and said it would be misguided to reform competition rules because it would result in costs being transferred to consumers.

"A different course of action is required. The first and most important step to take must be tearing down the barriers that still fragment the Single Market along national borders," Almunia said in a speech to the International Competition Law Forum in St Gallen, Switzerland.

However, Almunia noted that removing barriers "is beyond the remit of competition policy. In fact, these barriers are kept in place by many EU national governments.

"What political leaders are asking for requires solutions that are first and foremost in their hands," Almunia added, noting that national governments are unwilling to relinquish the "billions raised in [spectrum] auctions, which go directly to their respective national coffers."

The EC competition vice president spoke out after the German Chancellor Angela Merkel and European Parliament candidate Jean-Claude Juncker called for competition rules to be relaxed to allow key telecoms acquisitions to proceed.

Telefónica Deutschland's proposed acquisition of KPN's E-Plus and Hutchison Whampoa's planned purchase of O2 Ireland are among the deals currently being considered by the EC's competition regulator. The transactions are expected to trigger a wave of consolidation throughout the region if approved, because such clearances would be regarded as a tacit approval for a reduction in the number of mobile operators in national markets. The proposed acquisitions would cut the number of operators in Germany and Ireland from four to three.

Hutchison has reportedly offered concessions that would enable a new fourth player to enter the Irish market in a bid to gain approval for its deals. Telefónica has also reportedly offered concessions to gain clearance that may have included a commitment to cede spectrum to allow for a new entrant.

French politicians this week also indicated they are pushing for three mobile operators rather than the present four, and latest reports suggest Orange is in talks with Bouygues over a possible acquisition of Bouygues Telecom.

Almunia said the only way to ensure a truly single European telecoms market is to have "a fully fledged EU telecom regulator, EU-wide spectrum allocation, and no roaming charges."

Competition rules "would not have to change for enforcement to adapt to this scenario," Almunia added, noting that the EC "would assess the impact of most mergers on the whole of the EU--and not on individual national markets that would no longer exist."

Indeed, the only real change that needs to be made is to the mindset of the leaders of European national governments. "Those who believe that economic nationalism can still be a recipe for success in the digital era should update their views.

"The challenges of the 21st century cannot be tackled with the mindset and the policy solutions of the past century," Almunia concluded.

For more:
- see this EC press release

Related Articles:
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For European telecoms operators, 4 is a crowd
Telefónica Deutschland remains confident on E-Plus approval in Q2
3 Ireland offers to set up new mobile operator if EC clears O2 acquisition

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