T-Mobile has outlined its plans for integrating Tele2 Netherlands if the mobile operator wins approval from the European Commission for the takeover. In a presentation by CEO Soren Abildgaard to Telecompaper and other Dutch media, T-Mobile said the merger of the third and fourth largest mobile operators will lead to a faster roll-out of 5G, increased investment in fibre broadband and low prices for Dutch consumers.
The European Commission competition authorities have already opened an in-depth investigation into the merger, and a decision is expected by the end of November. Abildgaard's presentation outlined several promises for the first three years after the merger, in an effort to allay any concerns that a reduction in the number of mobile operators could lead to higher prices or reduced investment. T-Mobile has not proposed any remedies to the EU yet, he said, ahead of the opening of the 'statement of objections' phase of the investigation in September. According to the CEO, the merger as is should be allowed to go ahead, given the current market developments in the Netherlands. In addition to detailed discussions with the EU, the company plans a public campaign to highlight the expected customer benefits of the merger.
Faster 5G roll-out
The integration of T-Mobile and Tele2’s spectrum holdings is expected to put the company in a better position vis-a-vis rivals KPN and VodafoneZiggo. T-Mobile will gain frequencies in the 800 MHz band and boost its spectrum in the 2.6 GHz range. In the multiband auction planned for late 2019 in the Netherlands, more new frequency bands will become available. The increased capacity and efficiency should support a much quicker launch of 5G services than if T-Mobile remained on its own, Abildgaard said.
Tele2 and T-Mobile already have a site-sharing agreement, and the plan is to start immediately with deactivating the Tele2 network. The spectrum and customer base will be transferred to T-Mobile’s infrastructure as part of a wider upgrade to prepare for 5G. This should allow for the launch of 5G "at the flick of a switch", once the 700 MHz band becomes available in 2020, T-Mobile said. On its own, T-Mobile would not start the upgrade until after the next spectrum auction, leading to a later launch of 5G in 2022-23, the company expects.Entering the fibre market
The merger is also expected to help T-Mobile and Tele2 compete better in the fixed market, where KPN and VodafoneZiggo dominate, driven by the growing adoption of quad-play plans. Tele2 has scaled back its presence in the fixed market since launching its own mobile network in 2015, and continues to lose fixed customers, while T-Mobile only has a tiny fixed customer base after acquiring Vodafone’s fixed activities at the end of 2016.
Abildgaard said the synergies from the T-Mobile and Tele2 merger will create room for the companies to invest more in the fixed market, including an expanded presence on the fibre market. T-Mobile said it’s ready to commit to building out its fibre footprint with another half a million households on its active fibre network, in addition to the existing 1.1 million. This would focus on areas where T-Mobile and Tele2 already have DSL customers interested in an upgrade.
In addition, a number of new investors have entered the Dutch FTTH market in the past year, after KPN slowed its roll-out to only new-build areas. T-Mobile/Tele2 could be an attractive partner for the new fibre projects, helping to increase take-up in the demand aggregation campaigns by targeting its existing customers, the CEO said. With the KPN expansion and local partnerships, the new company’s FTTH footprint could reach 2 million homes.
Low prices, both fixed and mobile
T-Mobile is also promising to keep prices low after the merger, as that has been a key concern for the European Commission in past decisions on mobile mergers. In the fixed market, the company pledged to limit any price increases to inflation and pass on any savings from lower wholesale costs to customers. Abildgaard said that this will protect customers from KPN and VodafoneZiggo’s recurring annual price increases and help improve retail competition.
Furthermore, the company sees room to introduce month-to-month offers in the fixed market, rather than the usual one- or two-year contracts, giving consumers more choice. This comes as the Dutch government is planning to open up the CPE market to allow internet customers to choose their own router, rather than take the default option from the ISP. T-Mobile said the increased scale of the merged company will allow it to take a more aggressive stance in the fixed market, and the "no lock-in" promise will incentivise it to grow the customer base.
Tele2 unlimited data offer to continue
More importantly in the mobile market, the company sees a better business case for maintaining Tele2’s unlimited data offer after the merger. T-Mobile and Tele2 were the first to introduce unlimited data on the Dutch market, in early 2017, but Tele2’s price point of EUR 25 has been difficult to sustain economically, in part as it still relies on T-Mobile for 3G roaming. With their increased scale and efficiencies after the merger, the company promised to keep the Tele2 unlimited data deal at EUR 25 per month for at least three years. The operator expects to keep both the T-Mobile and Tele2 brands, as well as T-Mobile’s low-cost brand Ben going for three years after the merger.
Solving the rural digital divide
The company also hopes to address the rural ‘digital divide’ in the Netherlands with an improved fixed-wireless offer after the merger and launch of 5G. Integration of the two mobile networks and spectrum will improve capacity and lead to denser coverage, making faster wireless broadband with larger data allowances more economical and scalable. With the wireless offer and increased fibre coverage, the new company should be able to serve the around 0.5 million poorly connected households in the Netherlands, bringing at least 100 Mbps coverage to the entire country by 2020, ahead of the EU target date.
