What Belgian mobile consolidation means for Europe

Schermata 2020-12-14 alle 12.12.30


It looks like a small transaction in a small country, but it is more significant than one could expect: Proximus is going to buy Belgian-based MVNOs Mobile Vikings and Jim Mobile, and by doing so it indicates the way for mobile consolidation in Europe. Since mergers between mobile operators within the same country are highly disliked by competition authorities, especially by European DG COMP headed by Commissioner Margarete Vestager, the only chance left for mobile consolidation in Europe is the following: MVNOs beeing purchased by local MNOs. Just a remind: an MVNO is a mobile operator which rents spectrum by a mobile operators, like it happens in the fixed market when a new entrants rents the local loop from the incumbent.

Domestic mobile consolidation is regarded by European mobile operators as an instrument to increase margins and profits in markets were retail prices are falling due to competition and are not expected to rise again. Despite the incoming migration to 5G networks, and considering the burden for new investments, it is doubtful whether mobile operators will be able to launch new services that will invert this declining pricing trend. Consumers have been used by decades to be able to pay less for better services and 5G will not be an exception, unless something completely new will be offered to the market. However,  5G innovation seems to concern mostly the B2B and corporate segment with IoT, M2M and AI developments: a very promising and interesting market which, however, mobile operators cannot develop by themselves. 

Cross-border consolidation is still a theoretical option for European mobile operators, also because the European competition authority has been trying to push the market in that direction. However, this strategy is normally neglected by mobile operators because it will not bring what they need, that is to say: less players, less competition and prices up. Fact is, by acquiring a foreign player a mobile operator may enter into a new market which, however, remains separated by the original one and, herefore, synergies are limited while costs are increasing because of duplication of investments. Things could be different if cross-border acquisitions could lead to a pan-european market, but this scenario is not envisageble for the time being, because neither mobile operators, nor European regulation, seems to be aiming at this target. One should not forget that the European roaming framework has cancelled roaming surcharges only for users, but not for operators, with the consequence that national markets continue to be protected because of high access cost that should be borne by potential foreign new entrants. The final result is that the European mobile market remains, and will continue to be, a fragmented patch of national markets.

Facing the above scenario, mobile operators have incentive in buying independent MVNOs which, for the time being, are the only existing source of competition which can be annulled by way of acquisition. The move of Proximus in Belgium appears quite remarkable: in Belgium there are only 3 mobile operators (Proximus, Orange and Base) and the mobile prices are quite high with respect to the rest of Europe. To contrast this situation, in 2018 the Belgian government announced to open the market to a new 4th mobile operator, which would increase competition. However,  nothing concrete happened so far (not a surprise, if you look at how much Belgian politics is complicated) and, in any case, life for a new mobile operator in Belgium would be hard if majors MVNOs are bought, because it would have to rely only on internal growth. Whatever you look at this scenario, Proximus’ initiative seems a wise defensive manover, in light for potential entry by a 4th mobile operator in Belgium.

In this context, one should think whether the Belgian government should, rather than pursuing the 4th mobile operator option, instead try to prevent the acquisition of Viking by Proximus. This may be difficult in practice, because acquisitions are normally a matter for competition authorities, not for government, unless national security interests are at stake. The Belgian competition authority is independent from the government and will be hard for them, although not impossible, to prohibit a MVNO acquisition by Proximus, because there are no relevant competition cases to rely upon. The only chance to block the acquisition would be for another mobile operator (Base? Orange?) to stand up, but this event looks unlikely because, at the very end, all mobile operators are interested in domestic consolidation, irrespective of whom is buying whom.

Consumers could take a lead, however, since they should be the final beneficiary of competition and, in fact, Belgian consumers association Test-Achats is already advocating for a serious antitrust scrutiny.  

If Proximus succeds with Viking and Jim Mobile, a wave of acquisitions of MVNOs by MNOs in local market is expected in Europe. By the way, this trend is already ongoing, with French MVNO EI Telecom being bought by Bouygues. The Belgian case, however, is more remarkable because the purchaser is the fixed-mobile incumbent. This new scenario will probably lead to some increase of mobile tariffs in domestic market, while the structure of the European mobile market will remain more or less the same: 27 distinct mobile national markets. At this point, the European legislator may start to reflect whether this scenario is satisfactory, inavoidable or what; and whether something more should be done to push for European integration

The only possible option would be to implement the roaming regulation in more radical way, lowering the access cost to mobile networks and thus pushing mobile operators to compete abroad and not only in domestic markets.

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