In the wake of the failed Telenor/TeliaSonera merger in Denmark, EU competition chief Margrethe Vestager argued the commission does not favour a set number of competitors per market, but does back structural remedies for mergers such as creating new players.
“The first and most obvious point is that there is no magic number on the number of mobile network operators in a given country,” said Vestager in a speech to a US audience.
Her comments follow the high-profile merger failure in Denmark, which would have reduced the number of operators in the country from four to three.
In reviewing mergers, the commission works on a case-by-case basis rather than a set benchmark, argued Vestager.
Why the EC could not approve the Danish merger
The EC was “on the road to prohibit the merger” even before TeliaSonera and Telenor pulled the plug on their Danish deal, stated Vestager. The two operators abandoned their bid on 11 September, before the commission reached a decision.
However, the merger was in trouble in the commission’s eyes: “We considered the remedies offered by the parties to be insufficient to address our competition concerns.”
Denmark is a highly competitive market with low prices, high usage and wide customer choice, as well as a good take-up of 4G. All of these positives might have been at risk by allowing a merger in Vestager’s view.
TeliaSonera and Telenor made two proposals to the commission. In the first, they would have facilitated a new, fourth mobile network operator in Denmark.
To do so, they proposed to make available a “limited amount of spectrum for the roll-out of a self-standing mobile network, and a wholesale access agreement to their own joint network.” But the commission baulked at the scope and conditions to this offer, said Vestager.
“We had serious doubts that it would lead to the envisaged entry of a new fourth operator in Denmark,” she said.
Then came a second proposal from the two operators to divest a limited ownership stake in their shared mobile network to a new entrant with a right to use a corresponding share of the network capacity.
This was complemented by the divestment of one of the companies’ secondary brands and additional options, such as the take-over of some shops.
“In principle, this second proposal was a step in the right direction. However, in our view, it would not have been effective in remedying the identified harm,” Vestager added.
Competition vs network investment
She also attacked the argument that greater competition undermined network investment. In fact, she said, the reverse is true.
“Research seems to suggest that a reduction of the number of players from four to three in a national mobile market in the EU can lead to higher prices for consumers. But not that it leads to more investment per subscriber. In other words, it does not seem to lead to significantly higher overall investment by carriers,” she said.
And consumers do not benefit directly from investment, only indirectly through an improvement in quality and price, Vestager claimed.
The commission scrutinise any claims that mergers prompt greater efficiency. “However, only a fraction of the efficiency submissions we have seen in successive cases have met these criteria,” she added.
In the case of Denmark, the commission felt that a merger would not have improved investment and network quality. The commission’s proposed remedy was the creation of a fourth network operator to provide more competition.
“Some have questioned whether this means that we are having second thoughts about the remedies in the merger cases cleared in Austria in 2012 and in Ireland and Germany in 2014,” she noted.
In those cases, the commission backed MVNOs, a less structural solution, to deliver sufficient competition. While not questioning the MVNO-based approach, Vestager did say, in her view: “The more structural the remedy, the better”, implying operators are more likely to feature in her remedies than MVNOs.
She was speaking at a conference on antitrust law and policy at Fordham University in the US.