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10/12/2016

Commission deepens investigation of Scandinavian telecoms merger

Competition

Commission deepens investigation of Scandinavian telecoms merger

Margrethe Vestager [European Commission]

EU Competition Commissioner Margrethe Vestager has stepped up an antitrust investigation into the merger between Norway’s Telenor and Sweden’s TeliaSonera mobile operations in Denmark, the two companies said Tuesday (23 June).

The European Commission has sent a statement of objections to the two companies, a significant step in EU antitrust proceedings. The regulator had expressed concerns over the deal in April. The executive is concerned the merger could have an anticompetitive effect on the Danish telecoms market.

It said it could potentially reduce the number of mobile operators in the country from four to three and that this could lead to price increases for consumers and fewer innovative products.

European regulators have questioned the benefits for consumers of so-called four to three mergers. In Austria, in January 2013, Hutchison Whampoa bought its larger local rival Orange Austria, which raised concerns about competition in the sector.

In Denmark, the four biggest companies, apart from Telenor and TeliaSonera, are TDC and 3. Analysts said that the latter would be squeezed if the merger got a green light.

“Contrary to the concerns raised in the statement of objections we firmly believe the merger will ultimately be beneficial for competition and Danish consumers. We will continue in a constructive dialogue with the Commission to make sure all concerns are properly addressed,” Telenor and TeliaSonera said in a joint statement.

The two companies still expect the merger to be approved during the second half of 2015. If not, the status quo in the Danish telecoms market would lead to a continued drop in investment, they said.

Vestager is scheduled to decide by 2 September whether to approve the merger.

Big operators have long been asking the Commission to relax antitrust obligations to favour mergers in a continent where around 100 companies offer mobile telecoms services.

According to the news agency Reuters, Vestager is currently also reviewing Nokia’s €15.6 billion bid for French peer Alcatel-Lucent as well as Hutchison Whampoa’s €1.41 billion offer for Telefonica’s British mobile unit 02.

Background

Europe has about 100 mobile operators, set against six in the United States and three in China, making for a much more fragmented market.

Despite a record number of users, the EU mobile telephone industry has seen its revenues decline in the past years. Over the economic crisis, European companies have been struggling to pay off debts and build 4G and fibre broadband.

The European Commission proposed last September a wide reform of the telecoms sector intended to kick-start the underperforming European telecoms sector and incentivise investment in ultra-fast broadband networks.

Brussels proposed the creation of a real single market for telecoms in Europe, since the sector still operates largely on the basis of 28 national markets.

Timeline

  • 2 Sept.: Scheduled decision date on the merger.

Further Reading