This is a merger investigation, says the regulating officer – nobody’s allowed to move until the opportunity is lost
UK regulator Ofcom has ‘softened its stance’ on mergers and possible price collusion between the UK’s big four mobile operators, but telecoms analyst Strand Consult has warned that regulators in general could have a secret blockage over Understanding 4 to 3 Mobile Mergers.
Though Ofcom is reportedly now more amenable to mergers in the UK, the UK’s Competition and Markets Authority, which Ofcom advises over takeovers and the European Commission could take longer to move. Fears of price hikes were raised in response to an Ofcom statement: “Our stance on a potential merger would be informed by the specific circumstances of that particular merger, rather than just the number of competitors.”
Can Vodafone’s Nick read the room?
Reports claimed that Vodafone CEO Nick Read is anxious for a merger in order to boost the company’s performance, under pressure from the new activist investor Cevian. Read has called for a change in perception of the outcome of mergers among European Mobile operators. In particular he has sought to assuage fears over so-called ‘four to three mergers’, arguing that consumers might actually benefit from a genuinely fast fibre infrastructure.
BT Copper older than Dixon of Dock Green
Consumers in the UK sense they are being misled over ‘broadband’. As one consumer complained on a chat forum on ISP Review: ‘The copper that [BT sends round to] our house is older than Dixon of Dock Green.”
Last week, Read confirmed he is speaking to Europe’s telco strategists to emphasise to regulators that the industry must consolidate before it can economically stimulate. Read confirmed that Vodafone is speaking to Iliad in Spain, as well as rivals in Germany, Italy and the UK, including Three.
Merger on The Orient Express
As merger mania sweeps across Europe, ThreeUK’s CEO Robert Finnegan has also said the UK mobile market needs consolidation as its infrastructure is “subpar” compared with many other countries. “As things stand, the UK does not have the quality of mobile infrastructure it deserves,” Finnegan has said. “Investment is spread too thinly across too many players, meaning our networks are subpar by international standards.”
Finnegan said consolidation in the industry could improve networks. “Moving from four to three mobile players in the UK would mean better, smarter investment in the networks which would, in turn, improve the quality and scale of connectivity in Britain and would unleash more competition,” said Finnegan.
Merger brings more choice, better deals
Telecoms analyst Strand Consult claims it has wrestled with the blockages to consolidation for 22 years, since it first drafted the 5 to 3 merger in 2000 report. According to its latest report Understanding 4 to 3 Mobile Mergers there may be pre-conceived obsessions among regulators that there is a “magic number” of the minimum mobile network operators needed.
“The number 4 has acquired some traction,” says report author and founder John Strand. This concerns the competition authorities to much that they think they should pay special attention to mergers that reduce the number of operators from 4 to 3.
Is 3 the magic number or the axis of evil?
In the past the EC has cleared mergers such as H3G Italy/WIND/JV in 2016 with remedies and prohibited them between H3G/Telefónica UK) 4-3 mergers, although the General Court subsequently annulled the 2016 H3G/Telefónica UK decision in 2020, says Strand’s report.
“Outside of Europe the United States Federal Trade Commission (FTC) and Federal Communications Commission (FCC) approved the acquisition of Sprint by T-Mobile, albeit with remedies. The Australian Competition and Consumer Commission (ACCC) found in 2019 that three networks were delivering an effectively competitive outcome for consumers,” the report states.
However there remains one major hazard facing telcos, Strand warns. “Operators have derailed their success by telling a story too good to be true,” says the report. “Some operators do not believe that the facts are enough to convince the authorities that they have a solid case.”