The European Commission opened an in-depth investigation into the proposed merger of Wind and 3 in Italy, stating concerns that it “could lead to higher prices, less choice and reduced innovation for mobile customers”.
The deal would combine the Italian assets of VimpelCom (Wind) and CK Hutchison (3), which are respectively the third and fourth largest players in the market. This would create a new market leader in terms of subscribers, as well as reducing the number of mobile network operators from four to three.
Among the issues cited by the EC were the removal of “two important competitive forces” from the Italian retail market, with the joint venture having “limited incentives to exercise significant competitive pressures” on the remaining players; and a reduction in the number of networks which could host MVNOs, resulting in a weaker negotiating position for such companies.
The reduction in the number of operators could also increase the likelihood that operators would coordinate their competitive behaviour and raise prices.
While the EC has not specified how many operators there should be in a market, it has taken a tough line with some proposed deals – especially where a competitor would be removed from the running.
Hutchison has already had experience of this in the UK, where it is looking to combine its 3 business with Telefonica’s O2 UK, leading it to make a number of concessions to get the deal across the line (a final ruling has not been issued).
And in 2015, Telenor and TeliaSonera dropped a plan to merge their businesses in Denmark, against a backdrop of scepticism from the Commission.
The Commission said “the opening of an in-depth investigation does not prejudge the outcome of the investigation”. It has until 10 August to make its decision.