The European Commission has approved the takeover of Germany's fourth largest mobile network, E-Plus, by Telefónica. This move reduces the number of network operators from four to three. When the deal was first agreed between Telefónica and E-Plus' current owners KPN, it was of course expected that the regulatory approval process would be long, and that there would be conditions upon which approval depended. These conditions are that the newly merged operator will reserve a portion of its network capacity for the use of smaller operators who don't have their own networks - MVNOs. It also has to divest some of its combined spectrum assets.
Interestingly, the Financial Times had earlier reported that at a meeting to review the EC's proposed conditions for approval of the deal, only two out of 12 national competition regulators that had been invited to participate voted in favor of the proposal. The concern of the national regulators who voted against the proposal is that the condition that the new operator reserve network space for MVNOs will not be sufficient to avoid reduced price competition among the main operators.
There may be some genuine cause for concern. At the start of 2013, Austria became the first Western European market to successfully consolidate from four mobile network operators to three. Similar provisions were made to ensure competition. Despite this provision, prices have gone up. However, price competition had been exceptionally fierce in Austria, and prices really were at rock bottom - some of the cheapest anywhere in Europe. It could easily be argued that consolidation or no consolidation, something had to give, and the same is not entirely true in Germany.
This argument is probably of little comfort to consumers, however. What they notice is price increases and how they affect their spending power. Operators say that bigger margins are necessary to keep investing in improved services, but consumers as soon as consumers are feeling even a little unsatisfied with their service they are likely to feel extremely put upon if asked to pay more for it than they previously did. However, even if this effect is eventually felt by consumers in Germany, and it may not be, its realization will take some time, and the merger will be a fait accompli.
Mobile operators are looking for consolidation opportunities in national markets because market saturation and price competition has severely limited scope for further revenue growth in Europe, even as they continue to invest money in network improvements and new technology such as LTE. Regulatory and political bodies at both European and national level are trying to find a balance between protecting the interests of consumers and the interests of mobile operators as businesses, as well as the wider telecoms industry. Healthy competition is necessary to provide choice for consumers and to keep prices down, but businesses need to be able to thrive and provide profits for their shareholders, and also to reinvest and improve services for the future. Even when decisions have been made, opposition continues. In Germany, IDC fully expects continued resistance from regulatory bodies within Germany, as well as rival operators.
Eventually the tide of consolidation will prove irresistible, though it may rise very slowly. In France, a large European market that has only had four network operators for two and a half years the industry is already trying to find a practical way to consolidate, though efforts so far have proved fruitless. In Belgium, it recently emerged that a consortium of cable operators that had acquired mobile spectrum in order to launch their own network, which would have been the country's fourth network, had decided to give up the spectrum, deciding that they could not launch a profitable network under current market conditions. The appetite for consolidation is high among network operators as the need to cut costs becomes ever more pressing.
Interestingly, the Financial Times had earlier reported that at a meeting to review the EC's proposed conditions for approval of the deal, only two out of 12 national competition regulators that had been invited to participate voted in favor of the proposal. The concern of the national regulators who voted against the proposal is that the condition that the new operator reserve network space for MVNOs will not be sufficient to avoid reduced price competition among the main operators.
There may be some genuine cause for concern. At the start of 2013, Austria became the first Western European market to successfully consolidate from four mobile network operators to three. Similar provisions were made to ensure competition. Despite this provision, prices have gone up. However, price competition had been exceptionally fierce in Austria, and prices really were at rock bottom - some of the cheapest anywhere in Europe. It could easily be argued that consolidation or no consolidation, something had to give, and the same is not entirely true in Germany.
This argument is probably of little comfort to consumers, however. What they notice is price increases and how they affect their spending power. Operators say that bigger margins are necessary to keep investing in improved services, but consumers as soon as consumers are feeling even a little unsatisfied with their service they are likely to feel extremely put upon if asked to pay more for it than they previously did. However, even if this effect is eventually felt by consumers in Germany, and it may not be, its realization will take some time, and the merger will be a fait accompli.
Mobile operators are looking for consolidation opportunities in national markets because market saturation and price competition has severely limited scope for further revenue growth in Europe, even as they continue to invest money in network improvements and new technology such as LTE. Regulatory and political bodies at both European and national level are trying to find a balance between protecting the interests of consumers and the interests of mobile operators as businesses, as well as the wider telecoms industry. Healthy competition is necessary to provide choice for consumers and to keep prices down, but businesses need to be able to thrive and provide profits for their shareholders, and also to reinvest and improve services for the future. Even when decisions have been made, opposition continues. In Germany, IDC fully expects continued resistance from regulatory bodies within Germany, as well as rival operators.
Eventually the tide of consolidation will prove irresistible, though it may rise very slowly. In France, a large European market that has only had four network operators for two and a half years the industry is already trying to find a practical way to consolidate, though efforts so far have proved fruitless. In Belgium, it recently emerged that a consortium of cable operators that had acquired mobile spectrum in order to launch their own network, which would have been the country's fourth network, had decided to give up the spectrum, deciding that they could not launch a profitable network under current market conditions. The appetite for consolidation is high among network operators as the need to cut costs becomes ever more pressing.
