A number of recent European telecoms mergers have highlighted the difficulties in winning merger clearances on efficiency grounds, even where the deal would appear to give rise to obvious efficiencies. A number of mobile network operators, or MNOs, have claimed that joining forces with competing MNOs would give the scale necessary to undertake the very significant investments needed in network upgrades.
The Telia deal involved efficiencies of a different nature. The target was not a competing network owner, but instead a mobile operator offering services based on wholesale access to the network of an MNO – a so-called mobile virtual network operator, or MVNO.
After the acquisition in 2015 of Tele2’s operations in Norway (see this post), Telia and Telenor are neck and neck in the Norwegian mobile market, with shares of 45% and 44%, respectively (2015 data published by NKOM, Norway’s telecoms regulator, for the overall mobile market, including mobile telephony and data to consumers and businesses).
The target was Ventelo, a challenger who offers mobile subscriptions to business customers through network access agreements with Telenor, Norway’s incumbent operator. Ventelo is the number 3 player in the business segment with a share of 13% in this segment.
The Norwegian Competition Authority threatened to block the deal, arguing that Telia would have incentives to raise its prices to business customers after Ventelo had been eliminated as a competitor. However, the clearance decision of 7 April 2017, which has now been made public, shows that the parties convinced the authority that Ventelo would achieve a significant cost-reduction through the merger. With access to Telia’s network, Ventelo would no longer have to pay for access to Telenor’s network. Interestingly, this cost reduction was accepted as a merger-specific efficiency.
The authority concluded that some of the cost-reduction would be passed on to consumers, and that the efficiencies would outweigh the loss of competition.
While this decision will not be a game-changer for mergers between competing network owners, it will be studied carefully by network owners wishing to increase their footprint by taking over MVNOs.
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