Some much-anticipated deals have finally moved beyond the regulatory stage in Europe, and are set to create some new market behemoths that the operators involved hope will help them endure the tough competitive environment that prevails today.
Of course, the approval by the European Commission of mergers such E-Plus with O2 Germany, and O2 Ireland with 3 Ireland, have not been welcomed by everyone. Consumer advocates believe that a reduction in the number of operators from four to three in an increasing number of markets will cause prices to rise--and indeed that has been in case in Austria.
At the same time, operators in Austria will tell you the prices that existed prior to the merger of 3 Austria with Orange Austria, such as the often quoted €7.50 deal from Orange Austria, did not permit a sustainable business model.
Essentially, this argument is unlikely to ever go away. Consumer groups will always want lower prices; operators will always insist they need a certain level of pricing in order to survive.
Events in Norway, however, have raised the alarming prospect that this market could be reduced to a duopoly--a situation that has long been regarded as definitely not good for competition. This situation emerged after Tele2 failed to win an LTE licence in Norway and was therefore forced to consider options for its unit. These deliberations have now culminated in a sale of Tele2 Norway to rival TeliaSonera, meaning that TeliaSonera and former incumbent Telenor will more or less carve up the Norwegian market between them.
Bengt Nordstrom, CEO of Nordic consultancy Northstream, did not mince his words about what he thought about this situation, saying the sale "is the predictable result of a pretty miserable and failed spectrum licensing process, which has resulted in pretty dramatic consolidation".
Nordstrom added that the deal is also timely reminder for the mobile industry that "poor regulatory decisions can create uncertainty that makes a mockery of huge infrastructure investments."
Indeed, its inability to buy new spectrum virtually destroyed Tele2's competitive position in Norway overnight.
A more positive spin on the situation came from Jefferies, whose analysts note that the deal solves a strategic issue at a good valuation for Tele2 and gives a clean exit.
Nonetheless, the big question remains: will the deal pass successfully through the regulatory process?
'Visibility on the regulatory outcome is low, in our view," said the Jefferies analysts, although they noted that TeliaSonera's commitment to accelerate its LTE rollout would be a positive element, and of course there could yet still be a new entrant on the market in the form of Access Industries' Telco Data.
Another long regulatory process is no doubt in the offing, but what Telco Data--which did secure spectrum in Norway's auction--will do could prove critical.--Anne