The European Commission (EC) approved the merger of Telefonica-owned O2 Ireland with Hutchison Whampoa’s 3 Ireland, dependent on a number of conditions submitted by 3 Ireland in order to clear the way for the deal.
This case is one of two seen as a barometer for the EC’s attitude to in-market mergers in the telecoms space, particularly with regard to the impact on competition.
The other also includes Telefonica, although in that case as the acquirer of KPN’s German unit, E-Plus. The deadline for a ruling on this is 10 July. Telefonica is reported to have similarly offered a number of concessions in order to pave the way for the deal.
The Commission said that the Irish deal as originally proposed “would have removed an important competitive force from the Irish mobile telecommunications market to the detriment of customers,” even though it would not have seen the creation or strengthening of a single company with a dominant position.
To this end, 3 Ireland made a number of proposals intended to address this, which the EC said “remove the Commission’s concerns”.
The proposal from 3 Ireland paves the way for the launch of two MVNOs in the short term, with the option for one of them to become a full operator by acquiring spectrum at a later stage.
Up to 30 per cent of the merged O2/3 Ireland’s network capacity will be sold to the MVNOs at fixed payments, which the EC said is “more effective than the typical pay-as-you-go model that MVNOs currently use in Europe and under which they pay for network access according to the actual usage of their subscribers”.
Not only has this model been deemed “viable for the Irish telecoms market”, it was noted that “with a pre-fixed capacity at their disposal, the new MVNOs will have increased incentives to fill that capacity by offering attractive prices and innovative services”.
In addition, a pledge has been made to ensure that Eircom can stay a competitive mobile operator, following fears that 3 Ireland could “frustrate or terminate the network sharing agreement that Eircom, the third and smallest network competitor after the merger, currently has with O2 Ireland”.
This would limit Eircom’s options to achieve nationwide coverage in Ireland, including for the rollout of its 4G/LTE services. 3 Ireland has committed to continue the network sharing agreement on improved terms.