Orange/Sunrise merger blocked by Swiss regulator

Having discussed the idea for over two years, the owners of Orange Switzerland and Sunrise--France telecom and TDC respectively--have expressed their surprise that the planned merger between the two Swiss operators has been refused by the country's Competition Commission (CoCom).

According to CoCom, the merger would have reduced the number of mobile operators in Switzerland from three to two, half the number in neighbouring Italy and Germany, and would have created a dominant position for the new company and reduced choice for consumers.

Claiming to have received positive signals from CoCom in the past, the Swiss regulator's decision was a surprise because "market consolidation already happened in other countries in Europe," said Swisscom CEO, Carsten Schloter. Market analysts suggested that both companies could now look to open negotiations with CoCom, beginning a court challenge or abandoning the merger.

However, Michael Kovacocy, an analyst at Daiwa Capital Markets in London, suggested that, if the companies could come to an understanding with CoCom to share network infrastructure while maintaining some retail competition, that could serve as a precedent for future deals.

Such an example in Switzerland "could potentially lead in-country consolidation in Europe much more down the path of focusing on the network rather than the retail," Kovacocy said. In the long term, "we could potentially see an environment where we have fewer networks, but with some type of guaranteed access. On the retail side, we could actually see more competitors, rather than fewer."

For more on this story:
Business Week

Related stories:
Swiss operators consider sharing LTE network
Swiss networks to merge; France Telecom become majority owner
France Telecom hints at more European acquisitions, Belgium tops list
FT Orange mulls €7bn African and Middle East venture