The European Commission has sent a statement of objections to Deutsche Telekom and Tele2 over the proposed merger of their Dutch operators, saying it's concerned the deal will lead to higher prices in the Dutch mobile market. T-Mobile said it will engage in talks with the Commission to try and resolve the concerns and still aims to close the acquisition by the end of the year as planned.
The Commission's preliminary investigation, already extended in June, found that the merger could have negative consequences for competition in the mobile retail market, especially in the consumer segment. The merger of the third- and fourth-largest mobile operators would reduce the Netherlands to three players. T-Mobile and Tele2 have also played a challenger role, introducing sharply priced and unlimited data offers in the past year, helping to intensify competition on the mobile market.
T-Mobile Netherlands said it was surprised the Commission had not recognised the specific characteristics of the Dutch market and the benefits of the merger, which would lead to the combined company still being number three on the mobile market with an around 25 percent share of customers.
According to the latest figures from Telecompaper, T-Mobile and Tele2 had a combined share of 25.1 percent of customers (business and consumer) on the retail market at the end of Q2, up from 23.9 percent a year earlier amid gains at both operators. That makes them together bigger than number-two Vodafone with 23.7 percent of retail customers in Q2 2018. In terms of service revenues, Tele2 and T-Mobile took a 27.0 percent share in Q2, just behind Vodafone with 27.4 percent.
FMC importance
The company noted that this was not a standard 4-to-3 merger, as Tele2 is already to a large extent dependent on T-Mobile's network. Tele2 only has a 4G network and relies on T-Mobile for 3G roaming, and the two also share network sites.
T-Mobile earlier outlined a range of promises aimed at alleviating any Commission concerns and underlined again that its merger was the best chance to create a strong third player in the increasingly converged fixed-mobile market in the Netherlands. The company said competition on the Dutch consumer market is driven largely by the discounts offered on mobile by KPN and VodafoneZiggo looking to attract customers to fixed-mobile packages. The combination with Tele2 would the make the company big enough to offer a counterweight to that duopoly and could also offer a better and quicker solution to the threat of joint dominance recently signaled by Dutch regulator ACM on the fixed market, T-Mobile said in a statement.
Remedies possible
The contents of the EC's statement of objections were not made public. The companies will have the opportunity to propose remedies to the Commission in order to address its concerns. The Commission can decide then to make the conditions legally binding in order for the merger to go ahead or block the merger from proceeding if its competition concerns remain after the negotiations. The preliminary deadline for a final decision is 30 November.
Tele2 said in a short reaction that it was leaving all response in the matter to T-Mobile. Deutsche Telekom has agreed to pay a break-up fee of EUR 25 million to Tele2 if the deal is not completed.
