Thursday 30 March 2017

Brussels warns: no more 3 Ireland-style telco deals

Europe frowns upon 'virtual' operators in mergers - Commissioner Vestager

‘There can be no room for mergers that harm competition and raise prices for consumers,’ said Margrethe Vestager. Photo: Bloomberg
‘There can be no room for mergers that harm competition and raise prices for consumers,’ said Margrethe Vestager. Photo: Bloomberg
Adrian Weckler

Adrian Weckler

The European Commission has warned it will no longer support telecoms mergers similar to the €780m deal struck between 3 Ireland and O2 Ireland.

Criticising the practice of using 'virtual' operators as a facilitator, Competition Commissioner Margrethe Vestager said such deals may restrict competition.

"A virtual operator can't help being dependent on the companies that carry its data and its calls," said Ms Vestager.

"So it's difficult to design agreements that give virtual operators the freedom to really compete. And you risk having to monitor the arrangement for years, to make sure physical operators aren't preventing them from competing."

Her predecessor, Joaquin Almunia, agreed to allow 3 Ireland take over O2 Ireland in a €780m deal if 3 Ireland facilitated two new virtual operators into the Irish market. Those new operators, Virgin Mobile and iD Mobile, have guaranteed network capacity from 3 Ireland's physical network.

However, Ms Vestager said that such a use of virtual operators to strike merger deals is now frowned upon in such takeover propositions.

"That's why, in the Italian case [merger between 3 Italia and Vimpelcom], we had a clear preference for a structural solution… The solution in that case involves a new independent network operator [Iliad] entering the Italian market with its own towers and its own share of the airwaves." The remarks will be interpreted as a signal that the Commission is to pursue a hard line on telecoms consolidation throughout Europe.

"More than half of all internet access is through mobile devices and that means affordable mobile networks are essential," she said.

"To get that, you need competition. So there can be no room for mergers that harm competition and raise prices for consumers. We recently dealt with two planned mergers that would have done just that.

"So we had to block the merger between Three and O2 in the UK. And we were on the way to blocking Telenor's joint venture with TeliaSonera in Denmark, when the companies decided to abandon it."

Ms Vestager also said Brussels is to continue investigating restrictions on trading across the EU through the practice of geoblocking.

However, despite almost half of European retailers reporting price restriction practices from suppliers, she said that some price-fixing was "valid".

"Pricing restrictions can help to stop physical shops from disappearing," she said.

"Without them, people might go to a brick-and-mortar shop only to get a feel for a product, but then buy it more cheaply online.

"And limits on where products can be sold can help to keep up the exclusive image that people look for in certain brands."

Irish Independent

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