Mergers: Commission clears acquisition of Austrian mobile phone operator Orange by H3G, subject to conditions

Brussels, 12-12-2012 — /europawire.eu/ — The European Commission has approved under the EU Merger Regulation the proposed acquisition of Orange’s mobile telephony business in Austria by Hutchison 3G (H3G). The approval is conditional upon the implementation of a commitments package that will facilitate the entry of new players into the Austrian mobile telecommunications market. The Commission had concerns that the elimination of one out of only four mobile network operators in Austria could have led to less competition and higher prices, to the detriment of end consumers. To address these concerns, H3G submitted remedies, offering in particular to divest radio spectrum and related rights and to provide wholesale access to its network. In light of these commitments, the Commission concluded that the transaction would no longer raise competition concerns.

“European consumers increasingly use their mobile phones to upload and transfer data and new mobile data services are a major contribution to growth. The risks posed by more concentration in national mobile telephony markets cannot be ignored. The commitments proposed by H3G ensure that competition is preserved so that Austrian consumers continue to enjoy the benefits of innovation and fair prices.” said Commission Vice-President in charge of competition policy Joaquín Almunia.

The Austrian mobile telecoms market is highly concentrated. The proposed merger would bring together two of the four mobile network operators in Austria and the merged entity would face competition only from Telecom Austria with its mobile telephony brand A1 and from T-Mobile as primary physical network operators.

This market is characterised by high barriers to entry for competitors and consumers have little bargaining power when it comes to negotiating contracts with operators. The economic analysis conducted by the Commission, taking into account the parties’ particular strength in the private customer and data market segments, has shown that the market power of the merging parties would have been higher than what their market shares suggested.

The Commission was concerned that the transaction in its original form would lead to higher prices and a reduction of competition. To remove the Commission’s concerns, H3G submitted a package of commitments:

• H3G commits to divest radio spectrum and additional rights to an interested new entrant in the Austrian mobile telephony market. The potential new mobile network operator (MNO) will have the right to acquire spectrum not only from H3G but also additional spectrum at an auction planned in 2013 by the Austrian telecom regulator. The latter will reserve spectrum for a new entrant, in order to enable such an operator to build up a physical network for mobile telecommunication services in Austria. The new entrant will also benefit from privileged conditions for the purchase of sites for building up its own network in Austria.
• H3G commits to provide, on agreed terms, wholesale access to its network for up to 30% of its capacity to up to 16 mobile virtual network operators (MVNOs) in the coming 10 years. This will enable MVNOs to offer mobile telecommunications services to end customers in Austria at competitive terms and conditions. MVNOs generally need to enter into a business agreement with a mobile network operator in order to provide mobile telephony services to their customers.
• An up-front commitment ensures that H3G will not complete the acquisition of Orange before it has entered into such a wholesale access agreement with one MVNO.

The proposed commitments take account of the variety of competitors and business models present in European mobile telephony markets. The combination of a structural remedy divesting sufficient spectrum and sites to attract an MNO with the wholesale access remedy lowering barriers to entry for MVNOs ensures that competition will be safeguarded.

In light of these commitments, the Commission concluded that the transaction would no longer raise competition concerns. This decision is conditional upon full compliance with the commitments.

Background

H3G notified its proposed acquisition of Orange to the Commission in May 2012. The Commission opened an in-depth investigation in June 2012 (see IP/12/726). A statement of objections, setting out the Commission’s competition concerns, was adopted on 20 September 2012.

The Commission focussed its investigation on the Austrian market for mobile telecommunications services to end consumers. Throughout the proceedings it cooperated closely with the Austrian Competition Authority and the Austrian telecom regulator.

Companies

H3G (Hutchison 3G Austria GmbH) is an indirect wholly owned subsidiary of Hutchison Whampoa Limited, Hong Kong and provides mobile telecommunications services (voice, SMS and MMS) as well as mobile broadband and multimedia products such as mobile television, music, and video calling in Austria.

Orange (Orange Austria Telecommunications GmbH) provides mobile telecommunications services in Austria. Orange entered the Austrian market in 1998, at that time under the name “One”. Orange offers traditional mobile communications services (voice, SMS and MMS) as well as mobile broadband services. One was rebranded to Orange in September 2008.

Merger rules and procedures

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of theMerger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

There are currently three other on-going phase II investigations. The first one examines the planned acquisition of TNT Express by UPS in the small package delivery sector (see IP/12/816). The Commission has until 5 February to reach a final decision. The second phase II investigation concerns Ryanair’s project to merge with rival Aer Lingus (see IP/12/921).The deadline here is 27 February 2013. Finally, in the third on-going phase II, the Commission investigates the proposed combination of Munksjö and the European label and processing business of Ahlstrom, in the paper industry (see IP/12/1338), with a deadline on 29 April 2013.

More information will be available on the competition website, in the Commission’s public case register under the case number M.6497.