Margrethe Vestager, EU competition commissioner, has thrown down a marker of her intent to curtail consolidation in Europe’s telecoms industry by dismissing suggestions that a wave of big mergers is needed to boost investment. Vestager’s thinking on telecoms deals has been shaped partly by a prominent case from her native Denmark, where she served as economy minister and deputy prime minister. She launched an in-depth probe in April into a proposed JV between TeliaSonera and Telenor that would reduce the number of operators from four to three.
Margrethe Vestager, EU competition commissioner, has thrown down a marker of her intent to curtail consolidation in Europe’s telecoms industry by dismissing suggestions that a wave of big mergers is needed to boost investment. Ms Vestager has expressed particular concern about countries where the number of operators was dropping from four to three, and in a combative speech shot down the main argument used by the companies to justify such tie-ups. “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,” she said in a speech in Paris. “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.” A harder line on telecoms mergers would represent a volte-face by Brussels. Under the previous administration, a number of deals in Germany, Austria and Ireland were approved, albeit with some concessions intended to stimulate competition. Ms Vestager’s comments come at a time when a series of deals in the sector are under discussion across the continent. Hutchison Whampoa’s 10bn purchase of O2, the UK mobile group, from Spain’s Telefonica is expected to receive intense scrutiny from the commission. Consolidation in Italy is receiving closer attention after confirmation last month of merger talks between Wind and Three, the country’s third and fourth-largest mobile groups. Companies involved in the UK and Italian deals will hope that the commission’s decision to allow the merger between Telefonica and E-Plus in Germany last year will prove to be a precedent. However Airdata, a regional wireless German operator, has filed an appeal against that decision. Ms Vestager’s thinking on telecoms deals has been shaped partly by a prominent case from her native Denmark, where she served as economy minister and deputy prime minister. She launched an in-depth probe in April into a proposed joint-venture between TeliaSonera and Telenor that would reduce the number of operators from four to three. In her speech, she warned incumbents that she was aware of antitrust abuses. “We have also seen established players abuse their dominant positions to try and prevent competition from alternative operators. And we shouldn’t forget that these alternative operators are also behind major network investments in the EU,” she said. Research from Rewheel, a consultancy, suggests that prices rise sharply following merger approvals, citing the tie-up between Hutchison and Orange in Austria. However, telecoms executives retort that price rises tend to be matched by an increase in data capacity or improved services. Stephen Howard, an analyst at HSBC, argued that telecoms consolidation would boost network investment, which would in turn drive prices lower and bandwidths higher. HSBC could find no evidence to support the argument that there have been price rises in Austria and said “prices are in fact falling”. Last month, Brussels cleared Orange’s €3.4bn acquisition of Jazztel, the Spanish cable group, but demanded that the French group make concessions that would allow a new player to enter the Spanish market.