Consolidation in the European telecom market: the understood misunderstanding


The European Council, which met in Brussels in March 14-15, finally acknowledged, upon request of the European Commission, the question about need for more integration for the telecom single market:

Digital Agenda and other services (October 2013): the European Council notes the Commission’s intention to report well before October on the state of play and the remaining obstacles to be tackled so as to ensure the completion of a fully functioning Digital Single Market by 2015, as well as concrete measures to establish the single market in Information and Communications Technology as early as possible;

Thus, the European Commission, under the initiative of Neelie Kroes, responsabile for the Digital Agenda, is now going to prepare a strategic position, maybe a communication, to be presented to and approved by the European Telecom Council in October 2013. However, concrete information about specific measures to be taken are scarce.

It is interesting to see that many voices are advocating for a major integration of the European telecom market, however with different scopes and interests to pursue. It is not a misunderstatanding: in the reality, everyone is aware that the consolidation projects are different and may serve different scopes, but is confident that the result will be diverted towards the preferred scenario.

The incumbents, i.e. the former monopolist running the legacy infrastructures (Orange, Telecom Italia ecc.) are advocating for more national consolidation. They believe that operators in Europe are too many, and this number should be reduced via national mergers. According to ETNO, such national consolidation should free resources for the investments.

Such position is not shared Almunia, the European Commissioner for competition, according to which a simple merging process at national level would be detrimental for competition (and in fact he announced that antitrust authorizations will not be lifted, as it happened in Austria and Holland). The consolidation should happen instead at cross-border level, i.e., by allowing incumbents or other operators to buy telcos abroad and compete against other incumbents (as it rarely happens now in the fixed sector: there are few cases in the Nordic countries, and also Orange in Slovakia and Telefonica in Germany).

In other words, we are facing 2 different philosophies of consolidation: (i) the incumbents operators wishing a European (fixed) market of few big operators situated in different geographich areas and possibly non competing againts each other: Orange in France and Poland; Deutsche Telekom in Germany, Slovakia, Hungary, Greece, Romania and Croatia; Telefonica in Spain and Czech; and so on; (ii) Almunia recommending that consolidated  operators should be competing against each other in all markets, as it happens sometimes in the mobile sector already now.

In this respect, the position of Commissioner Kroes is not sufficiently clear yet. She has been frequenlty advocating for consolidation, presenting the example of China and US having few national operators. However, she never apparently considered that the difference between Europe and other areas lies in the number of telecoms markets: Europe has to deal with 27 national markets, US and China with only one each: the difference in the number of operators is there. Kroes she never clearly remarked the difference between national and cross-border consolidation processes, unlike Almunia. Therefore, a clarification from the Dutch commissioner, also with respect to the view of Almunia, is due to come in the next weeks.

The telecom market integration strategy, expected by October 2103, will be therefore a good basis to finally understands whether the European Commission intends to strenghten competition and enhance genuine integration in the European telecom market, or just to empower incumbents operators to bring the national markets back to monopolies.

Categories: Competition

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