The European Commission’s clearance of the Irish merger between Telefonica’s O2 Ireland and Hutchison Whampoa’s 3 Ireland has improved the chances of the Spanish giant acquiring E-Plus in Germany, as well as consolidation in its home market, according to Fitch Ratings.
But the EC clearance is facing opposition in Ireland from the country’s regulator ComReg as well as rival Vodafone.
The domestic regulator said the measures agreed in return for clearance of the merger “appear inadequate and ineffective to address the serious competition concerns and consumer harm identified by the EC”, although it welcomed the end to uncertainty and the network investment promised as a result.
Under the terms of EC clearance, up to 30 per cent of the merged O2/3’s network capacity will be sold to two MVNOs, with the option of one become a full network operator at a later stage.
Vodafone’s objection is that the potential for a new operator could undermine the benefits that will accrue from consolidation in the Irish market.
The most obvious candidate to enter the country’s mobile market is incumbent cable operator UPC, which could pursue a quadplay opportunity.
However, Fitch notes that elsewhere UPC has not pursued aggressive pricing with its quadplay strategy. Cable operators have tended to restrict their mobile offer to existing subscribers. UPC has 530,000 subscribers in Ireland.
According to Fitch, the benefits of consolidation might now spread to Germany if the commission decides to approve Telefonica’s acquisition of E-Plus from KPN.
However, approval is not certain, says the ratings agency, given that the German market is so much larger than Ireland. The Commission could argue its size justifies four major operators.
Consolidation could also occur in Spain where TeliaSonera’s Yoigo looks the most obvious candidate.