EC's Vestager hints at closer scrutiny of future operator consolidation

Orange, Telenor and Hutchison Whampoa may not be assured of receiving European Commission (EC) approval for planned mergers in Spain, Denmark and the UK simply because the EC cleared similar deals in recent years.

The EC's new competition commissioner, Margrethe Vestager, hinted that future mergers and acquisitions that reduce the number of network operators in individual member states could face tougher scrutiny after initial evidence from markets where consolidation has been allowed shows consumer prices are rising.

In an interview with the Financial Times, Vestager said her key goal is to ensure consumers and businesses have access to "affordable prices". She also noted that consolidation is having a negative impact on infrastructure investment, which is falling rather than rising as a result of the drop in competition.

Orange is currently seeking clearance for a €3.4 billion ($3.7 billion) acquisition of Spanish fixed-line operator Jazztel in Spain, while Telenor and TeliaSonera recently agreed to merge their Danish operations. A £10.2 billion (€14.1 billion/$15.4 billion) Hutchison Whampoa offer for O2 UK also faces Vestager's scrutiny, despite on paper appearing to be a similar proposition to the company's acquisition of O2 Ireland in 2014, and Orange Austria in 2013.

While a £12.5 billion bid by BT for UK operator EE looked set to be overlooked by the EC's competition commissioner because it would not cut the number of mobile operators in the market, Vestager hinted that she may seek to review the deal based on the likely dominance the pairing would have in the quad-play market.

Joaquin Almunia, the EC's previous competition commissioner, faced criticism for clearing the deals in Ireland and Austria, along with Telefónica Deutschland's acquisition of German rival E-Plus in 2014, the FT reported. Those deals were cleared on the condition that the merged entities surrender spectrum to rival network operators and enable new MVNOs to enter the respective markets in a bid to maintain competition despite the reduction in full network operators in the markets.

Initial evidence from Austria shows that consumer prices rose after Three Austria's acquisition of Orange's local business in August 2013.

While that is seen as a boon for operators--consolidation has largely enabled them to abandon price wars that damaged revenues--the new EC competition commissioner clearly remains to be convinced such consolidation is a good deal for consumers.

For more:
- see this Financial Times article (sub. req.)

Related Articles:
Analysts: EC MNO merger precedents bode well for Hutchison Whampoa's UK play
Austria's consumer prices rise following mobile market consolidation
Three Group to explore opportunities for further growth
EC tipped to closely scrutinise Telenor/TeliaSonera Danish joint venture
EC rejects Spanish bid to review Orange's €3.4B Jazztel offer

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