The availability of large amounts of investment capital and the business strategies of mobile operators[1] aiming at enlarging their European footprint have resulted in the recent years in a number of concentrations involving companies active in the mobile telecommunications sector in the European Union (EU). Examples include mergers between mobile operators within one and the same Member State, the acquisition of a mobile operator active in one Member State by a fixed operator having various subsidiary mobile operators in several other Member States or the acquisition of a mobile operator active in one Member State by an investment fund active globally.
This paper identifies markets in the mobile telecommunications sector that may be considered as relevant and identifies potential competition concerns that may arise in case of such concentrations under the EC merger control rules. In its analysis, it builds on the decisional practice of the European Commission (the Commission) under the EC Merger Regulation.[2]
Because of the specificities of the mobile telecommunications value chain, concentrations in the sector usually concern several relevant product and geographic markets within the meaning of Section 6, parts I and II of the Form CO,[3] i.e. the scope within which the market power of the new entity resulting from the concentration must be assessed.[4] These markets may be both horizontally and/or vertically affected within the meaning of Section 6, part III of the Form CO,[5] depending on the activities of the parties to the concentration.
At the retail level of the mobile telecommunications value chain, the relevant market is likely to be defined as "the market for the provision of mobile telecommunications services to end-consumers" (the retail mobile telecommunications market). There may or may not be a separate "retail market for advanced seamless mobile telecommunications services covering several countries provided to international mobile customers". At the wholesale level, relevant markets are likely to include at least "the market for access and call origination on public mobile telephone networks" (the wholesale mobile access and call origination market), "the market for voice call termination on individual mobile networks" (the wholesale mobile call termination market) and "the market for international roaming on public mobile networks" (the wholesale international roaming market).
Depending on the particular features of a concentration in the mobile telecommunications sector, other markets may equally be relevant or affected. However, based on their importance in the sector, this paper will focus on market definition and competitive assessment exclusively in relation to the markets mentioned above.
Consumers purchase a bundle of services from a mobile operator, which usually includes access (the possibility to receive calls), national, international and roaming call and SMS. At the retail level, mobile operators compete with each other with these bundles and it is either not possible or not practicable to purchase individual elements of the bundle separately from different mobile operators. Therefore, the relevant retail market includes the whole bundle of retail mobile telecommunications services.
It may be possible to define narrower markets according to the type of customer, i.e. whether mobile telecommunications services are provided to business/corporate customers or to private/residential customers. It may indeed be argued that the mobile telecommunications needs of a company are different from the needs of a private individual, especially in terms of roaming services. Furthermore, from the supply-side, if there are mobile operators whose customers are mainly private individuals, they may find it difficult to exercise a competitive constraint on mobile operators focusing on business customers.
On the other hand, it may be an important sign of the existence of a single market if
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mobile operators themselves do not make a clear distinction in their offers between corporate and private customers. Furthermore, the absence of barriers restricting the switching of corporate customers to residential customer tariffs also points into the direction of a single uniform market. This may, for example, be evidenced by a large number of corporate customers being actually on private customer tariffs.
In its merger decisions, the Commission has so far either defined a single market without further segmentation by type of customer[6] or it has left the exact market definition open because the competitive assessment would have remained unchanged whatever the exact market definition.[7]
It may also be possible to define narrower markets according to the type of payment, i.e. whether mobile telecommunications services are provided on a post-paid or a pre-paid basis. The general characteristics of a post-paid offer (e.g. lower per minute rates, attractive bundle with mobile handset offered, no roaming restrictions) may make it so fundamentally different from the customers' perspective that they would not be willing to take on a pre-paid offer in case of a small but non significant increase in the price of the post-paid service.
On the other hand, there may be clear arguments in favor of no distinction as a result of strong supply-side substitutability: it may be relatively easy for a mobile operator only offering post-paid services to introduce prepaid tariffs and vice versa.
The Commission has not yet defined separate retail mobile telecommunications markets according to the type of payment in its merger control practice.
Finally, it must be examined whether the retail mobile telecommunications market may be segmented according to the network technology used, that is second generation (GSM 900 or DC1800) or third generation (UMTS) standard.
One of the arguments in favor of not segmentas the market according to technologies is that the majority of mobile telecommunications services, such as voice telephony and small-bandwidth data service (e.g. short message services, multimedia messaging services, basic Internet access) are being offered using both technologies.[8] This argument is further strengthened if these services continue to make up the most important part of mobile telecommunications services offered to the end customer and if third generation mobile operators provide these services for the same price as second generation mobile operators.
Although other services that require faster transmission speed and larger bandwidth (such as video telephony, mobile TV, mobile broadband Internet and other multimedia services) can only be offered on third generation networks, these are only likely to constitute a distinct relevant market if they can be purchased separately from other services and do not form a part of a bundle of second and third generation services.
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