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EU’s digi VP: More telco consolidation! What about competition?

Telcos: Or ... you relax the merger rules

Telephone. Copyright: macinate

After just one year in the job, Europe’s Competition Commissioner, Margrethe Vestager, has already made a name for herself as being tough on telecoms mergers. Now her colleague, veep Andrus Ansip, has publicly backed her, telling industry representatives in Brussels this week that competition, not M&As, is the future.

Last month Vestager scuppered a deal in her native Denmark between Telenor and TeliaSonera, and in May she imposed tough conditions on Orange as it sought to buyout Jazztel in Spain.

Telco operators are keen to paint mergers as the only solution to a massive investment gap. According to ETNO (the European Telecoms Network Operators association), despite industry investment in broadband deployment of €86bn, there will still be a shortfall of around €106bn by 2020.

Ansip agreed that tackling this investment gap is “a major long-term challenge” but added “the public purse can't be expected to meet this shortfall”.

“The ongoing review of EU telecoms legislation will look closely at how to incentivise and leverage more private investment,” said Ansip. “As regulators, what we can do is to provide the appropriate environment to underpin a single telecoms market driven by fair competition."

"That is our basic principle and starting point. Pro-competitive regulation benefits consumers as much the telecoms industry,” he added.

“It is competition that will attract the investment to develop the high-speed broadband networks that Europeans need," said Ansip, so "relaxing competition rules is not the answer. Industry consolidation is not necessarily the answer either".

"Mobile telecoms companies across Europe are already investing in 4G/LTE networks, without merging their operations. Modern network-sharing technologies allow operators to share mobile networks, without the need for consolidation,” he continued.

That cut little ice with the big telcos present. The CEOs of KPN, Deutsche Telekom, Orange, Telefónica, Telenor Group and TeliaSonera amongst others issued a formal statement calling for more relaxed rules on consolidation.

“Our sector is in need of building scale and markets need to function at optimal levels. Consolidation, which creates that scale, will lead in turn to better outcomes for our customers, especially in light of the increasing demands on networks and services in the future," they said.

"We want to ensure more investment and higher value for money for customers. For this reason, we believe that competition policy should ensure a comprehensive assessment that includes investment, innovation, efficiency and quality of service,” they said in an open letter.

In the UK, the proposed merger of Three and O2 – which would reduce the number of operators from four to three – has led to complicated pre-notification discussions with the Commission.

Ansip said that “each case should be judged on its merits, and whether customers will benefit. Naturally, all are subject to scrutiny under EU competition law.” Watch this space. ®

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