Today, the Commission has
decided to approve the proposed joint venture between Hutchison and VimpelCom
in the mobile telecommunications sector in Italy.
This deal will combine
Hutchison's mobile business H3G with VimpelCom's WIND. They are two of the four
mobile network operators in the Italian mobile market.
It is the Commission's role to
make sure that mergers in the European Union do not weaken competition. In
mobile telecoms markets, effective competition ensures fair prices, quality
networks and spurs innovation. We want consumers to benefit from effective
competition, so they can enjoy better service and affordable mobile packages
that suit their needs.
Against this background, we
can approve this deal because Hutchison and VimpelCom have offered a strong
remedy. It fully addresses our competition concerns. This remedy enables a new
mobile network operator, the French telecoms company Iliad, to enter the
Italian market.
This is a good outcome for
all: Hutchison and Vimpelcom can combine their assets in Italy to grow their
businesses. Iliad can expand across borders and compete for customers in a new
market. And most importantly, Italian consumers will benefit, because the
market will continue to be competitive.
This outcome is the result of
our merger investigation. As mentioned, in the Italian mobile market today
there are four mobile network operators. The deal as notified would have
reduced this number to three: Hutchison and WIND's joint venture would have
been the new largest player, closely followed by TIM and Vodafone.
In a nutshell, our
investigation showed that this would likely have led to less competition and
higher prices for Italian consumers.
We had three main concerns:
First, the transaction would
have eliminated competition between Hutchison and WIND. Hutchison is the latest
entrant into the Italian mobile market. It has been an important driver of
competition. WIND has also played an important role in the market.
The transaction would have
reduced the incentives of the joint venture to compete, as well as those of its
competitors. We compared the situations with and without the deal: our
investigation showed that with the transaction, Italian consumers would likely
have faced reduced choice and lower quality mobile services. Also, retail
mobile prices would likely have been higher for all Italian operators than
without the deal.
Second, the transaction would
have changed the market structure by creating three similar sized competitors.
We feared that this change, and the reduced competition, could have made it
easier and more likely that the remaining three operators would coordinate
their behaviour in the market. This would likely have led to further price
increases for consumers.
Third, we found that the
transaction would have reduced the number of mobile network operators willing
to host so-called "mobile virtual network operators" on their
networks. These operators do not have their own networks, but rely on access to
the infrastructure of mobile network operators to provide mobile services to
consumers.
These three competition
concerns were very serious.
We could not therefore allow
this transaction to go ahead as originally notified to us. We needed a strong
and effective remedy that fully addressed our concerns.
We always look at the facts of
the specific case to see if a remedy addresses our competition concerns. But as
I said in May, when we decided to block a mobile merger in the UK market, there
are good reasons to prefer structural remedies.
They have the potential to
resolve competition concerns in mergers between competitors once and for all.
In this case, the parties have
submitted an effective structural remedy. They have offered the divestment of
sufficient assets to allow the creation of a new mobile network operator.
Notably, they will divest sufficient radio spectrum and mobile base station
sites. This will allow the new operator to provide retail mobile services to
consumers and offer wholesale access services to virtual network operators.
And more than that. The
parties have submitted this remedy as a "fix-it-first" solution. This
means that the parties have already entered into an agreement with the French
telecom operator Iliad to purchase the divested assets. Iliad successfully
entered the French mobile market as a fourth network operator four years ago,
and has established itself as an important driver of competition there.
Under its agreement with the
parties, Iliad will use the network of the joint venture to compete for an
initial transitional period. But Iliad will soon make significant investments
to build its own independent mobile network in Italy.
We believe that today's
solution will benefit Italian consumers and preserve effective competition in
the market after the deal.
We often hear that telecoms
consolidation within Member States is necessary to ensure network operators are
profitable enough to allow them to invest in networks. Some in the telecoms
industry refer to such consolidation as “market repair”. Our investigation
showed that some operators indeed hoped that the reduction from 4 to 3 as
proposed would result in "market repair".
We find this term inaccurate.
You do not repair the market by reducing competition, but by making sure
companies have the incentives to try to be better than their competitors in
terms of price, quality of service and choice.
Today's decision ensures this
for the Italian mobile market.
And it shows there is no need
for a trade-off between competition and growth through consolidation. Telecom
companies can grow in Europe by consolidating within the same country, if the
conditions are right. They can also grow by expanding cross-border. This is the
case for Iliad. It will increase its footprint in another Member State as a new
European player. We welcome this.
So, today's decision reflects
our consistent policy to ensure that telecoms mergers do not reduce effective
competition at the cost of consumers. For this, each case needs to be assessed
on its own merits. This is also to account for the market circumstances, which
vary from one case to another.
But our approach is always the
same. As is our goal: to make sure that EU consumers are not worse off and that
competition thrives. Today’s clearance decision with remedies ensures exactly
that for Italian consumers.
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