Mobile Mergers: The End of the 4:3?
The EC has reviewed six 4:3 mergers of mobile network operators (MNOs) since 2012. All of them were subject to in-depth probes; none of them were cleared unconditionally. There is one consistent trend: over time, the remedies which have been imposed have become more and more demanding.
In the first of these cases, relating to Hutchison’s takeover of Orange Austria in 2012, the EC was satisfied that any issues would be addressed by Hutchison’s offer to give virtual operators (MVNOs) wholesale access to its network. In 2014, the EC next cleared mobile mergers in Ireland and Germany. In those cases, a plain ‘Austrian-style’ MVNO remedy was no longer considered sufficient. While the EC did not insist on market entry by a new MNO, it requested that the acquirers sign up to a special deal: the MVNOs had to acquire 30% of the merged entity’s network capacity upfront. This, according to the EC, created for the MVNOs incentives to compete similar to those of an MNO. In the subsequent cases relating to Denmark and the UK, the EC went one step further: it insisted on market entry of a fully-fledged MNO. The merging parties were unable to accommodate that request, resulting in the withdrawal of the Danish notification and the prohibition of the UK transaction. Most recently, in Italy, the parties managed to convince a new MNO to enter the market and received EC clearance in exchange. This could be described as Europe’s first ‘4:4’ MNO merger.
Despite appearances, Commissioner Vestager has been keen to emphasize the EC’s ‘case by case approach’, and has stated that ‘there is no magic number’ of MNOs required to maintain competition in national markets. This seems to imply that the differences between the remedies imposed since 2012 may be explained by differences in the facts of each case. It is certainly true that there are distinguishing factors. However, a comparison of the German and the Italian case suggests that differences in the facts alone are insufficient to explain the different outcomes. Both cases concerned a combination of the third and fourth operator in While there were also a number of differences, none of them seem to be important enough to explain the paradigm shift from MVNO to MNO remedy. Rather, it appears that policy changes may have also played a significant role: the EC has become increasingly sceptical against ‘MVNO remedies’, which means that, in order to clear 4:3 mergers, a requirement to make a new MNO enter the market is ‘the new normal’.
Large countries, resulting in a new market leader with a combined share of 30-40%. The EC claimed in both cases that the parties were close competitors, and in neither case were network sharing agreements an issue.
What is the impact of the EC’s evolving approach on mobile consolidation in Europe? There are 11 four player markets left in the EU. In most cases, new MNO entry will not be possible, either because the merging parties do not have enough spectrum to divest or because such a far-reaching divestment would make the deal economically unviable. Does the EC’s new approach mean consolidation is excluded in those countries? This may go too far. But the precedents suggest that clearance without MNO entry would only be possible in very exceptional circumstances – and the EC has yet to explain what such circumstances would be.
Two of the EC’s mobile merger decisions (regarding Germany and the UK) are currently under appeal. It cannot be excluded that the EC may have to revisit its approach once the Court has delivered its verdict.
