EC chief questions telecoms industry over competition stance

EC chief questions telecoms industry over competition stance

15 JUN 2015

Contrary to the argument made by operators, infrastructure investment in the mobile industry can be stimulated by competition, Margrethe Vestager said.

The EU competition chief also questioned the corollary – that if operators do not combine with national rivals they will be unable to put more money into their infrastructure.

“Incumbent operators argue that if they cannot merge with their rivals in the same country they will be unable to increase their investment. I’ve heard this claim quite often, but I have not seen evidence that this is the case,” said Vestager (pictured).

“Instead, there is ample evidence that excessive consolidation may lead not only to less competition and more expensive bills for consumers, but that it also reduces the incentives in national markets to innovate,” she added.

In fact, network funding can be stimulated by competition, she said. For evidence, she pointed to the French mobile market, well known for intense pricing rivalry between four operators including latest entrant Free Mobile’s Iliad subsidiary.

“Following that entry, the overall level of telecoms investment in France grew, and  remains at higher levels than at the moment of Free’s entry,” she claimed.

Vestager was speaking at the Concurrences’ New Frontiers of Antitrust conference today (15 June).

Actually, this is not the first time she has questioned the link between competition and investment.

France’s incumbent operators are unlikely to agree with the EU competition chief’s analysis, since they have felt the pain of Iliad’s pricing strategy.

Last year Bouygues Telecom announced job cuts for up to 15 per cent of its workforce, having failed to merge with rival SFR. However, it also focused remaining resource on becoming a leading player in 4G.

No consolidation has taken place in France where Orange, SFR-Numericable, Bouygues Telecom and Iliad are locked in competition.

However, elsewhere the European Commission has looked favourably on in-country consolidation, albeit with conditions.

For instance, it greenlighted Telefonica Deutschland’s acquisition of E-Plus, seen as a benchmark deal earlier this year. Previously, the commission gave the go-ahead of Hutchison 3 Group’s purchase of rival Telefonica O2 in Ireland.

The commission has some major deals to assess, including Hutchison Whampoa’s proposed takeover of O2 in the UK, as well as Telenor and TeliaSonera’s planned merger of mobile operations in Denmark.

And Vestager has a different type of challenge with UK fixed incumbent BT’s proposed acquisition of EE, the country’s largest operator. The deal would create a major force in converged fixed-mobile services, much to the concern of smaller rivals including Vodafone.

The commission recently gave the go ahead for Orange’s purchase of fixed operator Jazztel in Spain, having extracted significant concessions in terms of infrastructure disposals.


Richard Handford

Richard is the editor of Mobile World Live’s money channel and a contributor to the daily news service. He is an experienced technology and business journalist who previously worked as a freelancer for many publications over the last decade including...

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