TheChek News Flow

Commissioner Vestager speaks on telecoms competition: Appearing at a US

competition conference, the EC’s competition commissioner, Margrethe Vestager, has

outlined her thoughts on the telecoms market, and especially the recent decision by

TeliaSonera and Telenor to abandon their proposed merger in Denmark. The tone is

tough, but the content largely reiterates a set of well-established Commission views.

consolidation has revolved around the question of whether the EC has a magic number of

operators per country in mind, and – more specifically – whether that number is three or

four? Invoking the hip-hop trio De La Soul, Commissioner Vestager states “there is no

magic number,” clarifying further: “The Commission has not laid down a general rule

saying that three or four network operators are necessary.” This is very much what we

would anticipate, and is actually a welcome clarification – given that the Commissioner’s

comment with reference to Denmark that “it was necessary to have a fourth mobile

operator” (Reuters, 11 September 2015) has been quoted out of context as indicating that

the EC has a new ‘rule’ on this matter. Instead, the speech re-emphasises that each market

and case is different, and must be considered on its own merits.

EC unconvinced by trade-off between competition and investment: Commissioner

Vestager remains sceptical on this crucial point, stating “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.” Our own work indicates that, in the market that was the first of the recent

batch to consolidate (Austria), and so has the longest track record, prices have fallen since

the transaction. Furthermore, the pace of those price declines was faster than that seen

prior to the merger. Although there are data series indicating higher ‘prices’ have emerged

in Austria, these do not track prices but bills (and do not take into account the quality/

quantity of service provided). Additionally, we would argue that the link between

consolidation and investment is becoming progressively better established. Leaving aside

our own work identifying an inverted-U relationship between the two (yielding the

conclusion that consolidation would mean greater investment in European markets),

academics are now increasingly weighing into the field. For instance, see the recent paper

Evaluating Market Consolidation in Mobile Communications, by Dr Christos Genakos,

Professor Tommaso Valletti and Professor Frank Verboven (CERRE, 15 September

2015), which concludes that consolidation does indeed lift operator investment.