The decision-making process in a nutshell
The Commission’s decision clears the transaction between Orange and MásMóvil provided that the parties comply with the commitments offered to Digi.
The milestones of the Commission’s investigation can be reduced to four main events:
- April 2023: the opening of the Phase II in-depth investigation to assess if the proposed transaction could restrict competition in the Spanish retail markets.
- June 2023: the issuance of the Statement of Objections (SO) informing the parties that the proposed transaction could eliminate a significant competitive constraint and an innovative rival in the Spanish retail markets for mobile telecommunications services, fixed internet services and multiple-play bundles.
- December 2023: the submission of remedies for the wholesale mobile market which are finally published in the decision.
- February 2024: approval of the JV between Orange and MásMóvil subject to commitments.
Telefónica’s advocacy in recent years has focused, among other things, on promoting consolidation in national telecommunications markets. Given the importance of the Orange/MásMóvil transaction for the consolidation of the Spanish telecommunications industry, Telefónica has actively engaged with the Commission to share its views on the functioning of the market.
The Commission has missed a great opportunity to address the challenges of Europe’s connectivity infrastructure
It is generally accepted that innovation and investments are the main drivers for the growth of an economy. In fact, it is only by means of investing in productive capacity that users can access products and services of any kind in a sustainable manner. The telecommunications industry is not an exception to this rule.
The European Commission recognizes that telecommunications networks are the enablers of the digital services of the future. However, in an increasingly competitive global context, where data traffic growth is exponential, Europe is failing to reach its Digital Compass objectives. At present, Europe is lagging behind the US, China and South Korea in deploying standalone 5G networks.
The European Commission also recognizes that the current financial situation of the operators in the EU electronic communications sector raises uncertainties as to whether operators will achive the substantial investments that are needed to catch up with the technological change and future needs. Delays in this respect represent a huge vulnerability for the European economy as a whole.
Against this background, merger policy plays a decisive role in the sustainability of the telecommunications markets. Operators in the sector need new national market structures that ensure sufficient profitability, and thus encourage investment. If operators were allowed to freely exit the market, typically by merging with existent players, remaning operators would be able to achieve scale to obtain enough returns for investing in new technologies, reducing unitary costs, and providing for new and innovative services.
The proposed spectrum remedy prevents Spanish operators from achieving sufficient scale to make large investments in next generation infrastructure. In fact, in June 2023, the Spanish Government modified the spectrum caps precisely to encourage investment in 5G, and the CNMC claimed that “From a technical point of view, the concentration of radio resources on a smaller number of operators might be desirable, since it would allow them to decongest their networks and improve the services they can potentially offer end users”.
Hence, by imposing conditions on the approval of the Orange/MásMóvil deal, the Commission has prioritized regulatory intervention over the laws of free competition in a well-functioning market and has missed the great opportunity to promote an investment-friendly market structure for telecommunications operators in Spain.
What next? It is time to reflect on whether the EU’s merger rules are still fit for purpose
It is time to reflect on whether the EU’s merger rules are still fit for purpose. The EU Merger Regulation was last revised 20 years ago and since then, European consumers and businesses have adapted to a new economy that is more globalised and digital. Significant risks have emerged, some of them are the increasing fragmentation of the single market, the dependence on foreign economies and the overall decline of EU’s industry competitiveness.
Telefónica believes that the new economic context reflects the weaknesses of the EU Merger Regulation, which should be revised in order to introduce a more comprehensive analysis of consumer welfare, including both the long and the short term. This implies the introduction of stronger checks and balances on DG Competition to ensure that merger control decisions are aligned with the EU policy objectives so that opportunities to create connectivity infrastructure ready for the economic and security challenges of the European Union are not missed.
