KPN monopolises Dutch fibre market to NMA limits

Wednesday 17 October 2012 | 21:28 CET | Market Commentary

Dutch cartel office NMA has approved KPN’s acquisition of four FTTH service providers owned by Dutch investor Reggeborgh. The four are Concepts ICT, XMS, Edutel and Kickxl. The approval sees KPN increase its share of the broadband market from 39 percent to almost 41 percent, putting its goal to have a 45 percent share by 2015 back in sight. The approval does not come as a total surprise as NMA had already approved the acquisition of FTTB service provider Lijbrandt, wholesale FTTH TV operator Glashart Media and wholesale FTTH operator Reggefiber Wholesale in April of this year.

Almost at the same time, KPN announced that it was discontinuing its plan to acquire CAIW, which is active as a triple play service provider on the cable/FTTH networks of CIF. The main reason for KPN’s abandonment were NMA’s objections against the takeover regarding significant market power on the broadband, TV and fixed telephony markets on a regional level.

NMA’s statement about the approval for the Reggeborgh service providers claims that the acquisition does not impede competition as there remain enough FTTH service providers including Vodafone and Tele2 as well as competition from cable operators and DSL providers to choose from by consumers.

Still, the acquisition looks similar to the situation that developed a couple of years ago when KPN and its subsidiary XS4ALL went on a shopping spree among DSL providers with the result that a number of DSL brands were taken out of the market including Tiscali, Demon and Compuserve. The diversity of the Dutch broadband market narrowed to the cable network operators (UPC, Ziggo, Delta and Caiw) and three large DSL providers (KPN, Tele2 and T-Mobile Online) whereas KPN and its brands XS4ALL and Telfort currently dominate the DSL market with a market share of around 75 percent.

KPN’s market share of the FTTH/B broadband market including the 120,000 or so customers from the acquisition grows to around 70 percent (based on the numbers from Telecompaper’s quarterly report on the Dutch broadband market in the second quarter of 2012).

The big difference between both situations is that the FTTH/B market is at the beginning of its economic lifecycle with the largest telecom providers such as Vodafone and Tele2 emerging as direct competitors to KPN whereas the consolidation on the DSL market occurred at the time that the market started to show signs of saturation. Another difference is that competition from cable operators is much stronger than a couple of years ago, due to the successful triple play sales by Ziggo especially and to a lesser extent UPC.

The approval of the acquisition is a pity for the whole broadband market, though NMA and Dutch telecom regulator Opta (to be merged into ACM per 1 January 2013) followed regulations and competition laws to the letter. KPN monopolises the consumer fibre market to the limits set by NMA and can now try to do the same on the business market, for example by agreements similar to the one signed with RoutIT. Also, Vodafone missed (or did not have) the change to bolster its fibre strategy by becoming the largest competitor of KPN of fibre networks by trying to acquire Concepts ICT, XMS, Edutel and KickXL.

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