Sacrifices at the Regulatory Altar, just published by telecoms consultancy TechPolis, notes there have been few deals blocked outright by competition commissioners and telecoms regulators – only in the US and Taiwan in fact – but it is harder to get deals through without the participants having to pay a pound (or several pounds) of flesh.
The most regulatory resistance comes when the number of mobile operators in a single national market will be reduced from four to three by the proposed merger or acquisition. Three recent deals in Europe are cases in point, where national authorities were keen on keeping four mobile operators but were overridden by the Commissioners in Brussels, and specifically then competition commissioner Joaquín Almunia. These were the merger between Three and Orange in Austria which was approved in December 2012, the Three acquisition of 02 in Ireland (May 2014) and the Telefonica acquisition of E-Plus in Germany (July 2014).
New competition commissioner Margrethe Vestager has said she is aware of rising prices in these markets following the mergers, and will be taking a much more detailed look at the proposals still on the table.
“The merger between the Danish arms of Telenor and TelisSonera has been under the microscope for some time and a deadline on making the decision keeps being pushed back. Three’s proposed acquisition of O2 in UK and Three’s merger with Wind in Italy will be subject to detailed scrutiny,” says Mike Newlands, TechPolis research analyst and co-author of the report.
The global focus on M&A is now poised to fall on South Asia says the report’s other co-author, TechPolis CEO Ricardo Tavares. “By any comparison with international standards the countries of South Asia, and some parts of neighboring Southeast Asia, simply have too many mobile operators for each of them to be economically viable.”
The pressure for consolidation is most obvious in India where there are 12 operators, most of them only operating in some regions but there are still up to 8 competing with each other in the most lucrative licensing regions or “circles”. The frustrated demand for M&A in India has been cooped up by successive governments dragging their feet on reform of outdated rules, says Tavares, “but the need for urgent action increases by the day as operators and their customers suffer the consequences of fragmented markets resulting in poor network quality and availability.”
In neighboring markets the situation is not quite so dire, and M&A activity has been delayed by the operators and their shareholders rather than rules and regulations. There are signs this is now changing as the need to build out new 3G and 4G infrastructure make the current situation, with five or six operators per country, economically unfeasible.