Vestager investigates Spanish telecommunications, Europe prepares for consolidation

Europe could find itself at the beginning of a new phase in the process of consolidating European mobile operators, a process so longed for and demanded by the telecommunications sector which sees operator mergers as a means of raising prices, recovering profitability and, hopefully , finance investments.

The European Commission has in fact just opened an in-depth investigation (so-called “Phase 2”) into the merger of the operators Orange and MasMovil which, by joining forces in Spain, would bring the number of Iberian mobile networks from 4 to 3. Although the the opening of the investigation may seem a bad sign for those who were hoping for a quick and unconditional green light, some of the reasons expressed by the Commission in its press release seem to herald interesting scenarios. Indeed, the Commission observes that the merger would restrict competition in the Spanish mobile sector, driving up prices and making it more difficult for mobile virtual operators (MVNOs) to compete: these are operators that do not own spectrum and mobile networks, but they use those of others through a wholesale agreement, thus being able to provide mobile services like any other operator: in Italy the most important are CoopVoce and PostePay, but in Europe there are many of them and they serve 10% of the market.

Back to the past
We could therefore find ourselves faced with an opening by the Commission towards a mobile competition model no longer based on the number of mobile networks (very often at least 4) in each national market, but on the presence of a wholesale market which allows the operation of MVNO operators alongside mobile network operators. If this were the solution, Orange and Masmovil could obtain authorization from the Commission, provided they open up the network resulting from the merger to one or more MVNO operators. This way, they would not be forced to sell part of the network and spectrum to a new mobile operator.

For the Commission, this would be a return to the past, since the favor towards mobile mergers conditional on commitments towards the MVNO market had been a characteristic of Brussels during the Almunia era, i.e. until 2014. During this period, between 2012 and 2014, mobile mergers had been authorized in Austria, Germany and Ireland, all allowing for the reduction of mobile operators from 4 to 3 in each national market, but on the basis of a commitment to bring MVNO operators into the market to ensure greater competition. The Austrian case had certainly been the most striking, as Hutchinson had committed himself to new MVNOs with a real reference offer. In Germany and Ireland the MVNO commitments had been weaker and more controversial.

The Vestager Doctrine
Subsequently, with the arrival of the new Competition Commissioner, Margarete Vestager, the music had changed, with Commission offices generally opposing mergers that would reduce the number of mobile operators from 4 to 3. This happened in the United Kingdom and Denmark, where merger plans had foundered, and so was about to happen in Italy in 2016, where the merger between Hutchinson and Wind was ultimately conditional on the sale of assets and spectrum in favor of a new entrant, the French Iliad. The only exception to the Vestager doctrine had been Holland, where in 2018 the merger between T-Mobile and Tele2, involving the reduction of the Dutch mobile network operators from 4 to 3, had been lightly authorized, thus giving rise to some conspiracy speculation about pressure from Germany.

The Spanish case
The Spanish case therefore opens up the possibility of returning to the practice favorable to mobile consolidation which was practiced in the EU until 2014. The reason for this revirement could find itself in the peculiar history of the Spanish mobile market: MasMovil began to operate in Spain as an MVNO, thanks to a rare favorable legislation towards these operators, and then developed by acquiring other players until it became a real network operator. A virtuous circle, therefore, which started with an MVNO and which could continue if the operation were authorized on the condition of opening the Orange/MasMovil network to other MVNO operators. It would not be strange given that MVNO operators are no longer low-cost operators as at the origins, but operators that offer diversified services and assistance, up to the development of innovative IoT services.

The European Commission has given itself until 21 August for the final decision.