UPDATED 17.15 BST: The European Commission (EC) is now satisfied that Telefonica’s acquisition of E-Plus will not harm retail or wholesale competition in Germany – provided certain conditions are met – and has approved the merger.
Despite a reduction in the number of the country’s MNOs from four to three, Joaquín Almunia, in charge of EC competition policy, said “[German] consumers will continue to enjoy the benefits of a competitive market”.
Anne Bouverot, GSMA director general, welcomed the EC’s decision on the merger but warned that “efforts should be redoubled to reduce constraints on market driven restructuring”.
She added that a streamlined merger review process and reduced remedies are “essential” in order to increase Europe’s economies of scale and scope. In turn, she argued, this would increase long-term investment and encourage more innovation in the region.
“This change can only be achieved by a comprehensive review of Europe’s antitrust framework,” she said.
Telefonica has given a range of commitments to get the deal through, not least in making it easier for MVNOs to enter the market (or for existing ones to expand).
The operator has pledged to sell – before the acquisition is completed – up to 30 per cent of the merged company’s network capacity, at a fixed price, to a maximum of three MVNOs.
The capacity is measured in terms of bandwidth. MVNO entrants will obtain a dedicated “pipe” from the merged entity’s network for voice and data traffic.
Telefonica has also pledged to divest radio wave spectrum and certain assets, either to a new MNO entrant or to any MVNO that has taken up network capacity.
EC claims that these assets, combined with an upcoming frequency auction to be organised by the German telecoms regulator, could facilitate market entry of a new MNO.
On the wholesale front, Telefonica has committed to offering wholesale 4G services to all interested players in the future. In addition, Telefonica has undertaken to improve its wholesale partners’ ability to switch customers from one MNO to another.
Not everyone is happy about the prospect of network consolidation in Germany. Germany’s anti-trust watchdog has previously expressed concerns about reducing competition.
Moody’s also recently warned that by imposing tough conditions on network mergers, the European Union is in danger of heating up price competition rather than reducing it through sector consolidation.
The ratings agency pointed to stringent ‘competition remedies’ required in Ireland before the EU was willing to wave through the merger of O2 and Three, the respective subsidiaries of Telefonica and Hutchison Whampoa.