Stories by STAN OKENWA
New report of leading European telecoms research group, GSMA has revealed mergers that can boost investment in next-generation infrastructure and deliver long-term consumer gains for both network operators and telecoms services consumers across the world.
A new Frontier Economics report commissioned by the GSMA, “European Mobile Network Operator Mergers: A Regulatory Assessment” was developed in response to recent debate on the effect of consolidation on European mobile market performance.
The report examines how the impact of mergers can ultimately lead to consumer benefits such as lower unit prices, enhanced quality of service and greater coverage in remote communities.
Anne Bouverot, director general of GSMA said “Now is the time for Europe to catch up with the US and Asia in providing its citizens with faster connection speeds and access to the latest mobile broadband technologies. To that end, we ask the competition authorities to more readily consider the advantages of mobile mergers and in particular the long-term benefits they can deliver to consumers.”
Mobile mergers have recently been completed in Austria, Germany and Ireland, with the number of network operators in each country falling from four to three.
To date, competition authorities have tended to focus on the short-term pricing implications of mergers, with a significant reliance on the Gross Upward Pricing Pressure Index (GUPPI) 2 but less attention to the efficiency and investment benefits that enable innovation and help build consumer confidence in mobile services.
Key findings of the report say mergers can help increase investment and Quality of Service (QoS)
Competition authorities should consider placing greater focus on how mergers may change the operators’ ability and incentive to invest, which will ultimately enhance the delivery and cost of mobile services for consumers.
Investment incentives include a larger customer base that leads to economies of scale and the ability to differentiate from competitors if the merger results in a superior spectrum holding.
The report noted that there is no robust evidence to suggest that four-player markets have produced lower prices than three-player markets in Europe over the past decade.
GUPPI analysis has proved unreliable when estimating the impact on unit prices expected to result from mobile mergers3.
Evidence from the recent Austria merger confirms unit prices did not increase as authorities had anticipated.
Mergers can accelerate the transition between technology cycles in the mobile industry, which are responsible for most reductions in unit prices, as well as improvements in quality and service innovation.
Competition authorities have often argued that network sharing represents a preferred alternative to mergers.
However, network sharing offers weaker incentives to invest as there is little competitive advantage to gain when at least two operators have access to comparable networks.
It added that if operators are compelled to provide access to their networks to third parties, this could reduce rather than sharpen incentives to invest as a result of the merger, significantly reducing benefits to consumers.
Remedies that involve reallocating network assets or reserving spectrum for other operators mean that these resources are not available for use by the merged entity.
Bouverot added further that “In a fast-evolving communications landscape, with accelerating data consumption and new Internet-based competition, the EU must ensure that mobile markets can restructure and move quickly to realise the advantages of moving from one technology cycle to the next”.
“We ask policy makers to recognise how mergers can drive the investments required to provide long-term socio-economic benefits for Europe’s citizens and businesses and help bridge the digital divide.”
The GSMA represents the interests of mobile operators worldwide, uniting nearly 800 operators with more than 250 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and Internet companies, as well as organisations in adjacent industry sectors.