Another industry group, the GSMA, has at the same time called on governments to ensure enough spectrum is available and allow room for market consolidation. It also called for a transparent, supportive and predictable regulatory environment.
A number of merger plans have been blocked by regulators in recent years. To simplify things, we look at three sectors: cable, mobile and incumbents.
- Kabel Deutschland's proposed takeover of Tele Columbus was recently blocked. In general it has been difficult for cable operators to build national operators through mergers.
- The consolidation of the Greek mobile market to two operators was also stopped by regulators. Reports also suggest that the French government would block any attempt to narrow the French mobile market to three rather than four operators, ruling out in advance a merger of Free Mobile and SFR. Two players appears to be too few, but sometimes governments also find three too little for healthy competition.
- As far as the former PTTs are concerned, there has been very little activity. Telia (Sweden) and Sonera (Finland) were allowed to merge, and in Eastern Europe, various former monopolies have been acquired by Deutsche Telekom, France Telecom and Telekom Austria. The acquisition by Telefonica of a stake in Telecom Italia did raise some concerns for the Italian government, but in the end went ahead.
As far as the mobile market is concerned, governments look at things on a case-by-case basis. It does not appear that regulators are being all too difficult. KPN and Telefonica are likely trying to get their merger in Germany (E-Plus and O2) past the government first, before announcing it to the market. DT and FT may also be trying to sell their joint venture EE to Vodafone, O2 or 3 UK and first be trying to get a greenlight from regulators.
The cable and mobile markets in Germany will see some changes in the near term if Kabel Deutschland is acquired by Vodafone. The rumoured deal does not appear especially sensible, as what does a national operator like Vodafone need a regional operator like Kabel Deutschland for? If it does happen, it will present an interesting new case. The rumour that Numericable is preparing a bid for SFR has also resurfaced, so France could be presented with a similar merger scenario.
The fixed market is a bit more difficult. Unbundling of the copper network has resulted in extensive competition among DSL providers. In the Netherlands most of the unbundlers have already been acquired by KPN, which is reason enough for ETNO to claim that unbundling is no solution for long-term competition. Cable operators, in fear of also becoming victims of unbundling, raise a similar argument. The level of wholesale tariffs presents an immediate problem. How should they be calculated? Could they better be increased, so the incumbent has more money to invest? Or should they be reduced, so challengers have money left to invest? This is an important question, as the incumbents for years have handed their so-called 'excess' cash to shareholders, without putting aside reserves for the migration to FTTH. Operators such as KPN, Orange and Swisscom would like to switch completely to fibre, although there are some incumbents that find FTTC is enough (namely BT and Deutsche Telekom). And now the government is called on to help - not with cash (like in the financial sector), but with more flexible regulation.
The most painful example is KPN, which sees itself forced to raise up to EUR 4 billion in a capital increase. The comparison with the financial sector can be taken a step further. If the problems worsen and more incumbents need to raise capital, nationalisation could become a reality. Especially in cases where the state still has a big stake, such as Belgacom, Deutsche Telekom, Orange and TeliaSonera.
In the end, it's not so bad yet with the former PTTs. Unless may be it is, given ETNO's plea to the European Commission?
