Given the political pressure heaped on  Joaquín Almunia, the EC Competition Commissioner over the past few months, it’s little wonder that the German mobile telecoms market, about the most expensive in Europe, will now get its four players to three players consolidation approved. That’s the option that Germany’s leading telecoms companies and its  Chancellor, Angela Merkel, have been recommending forcefully to Almunia, and he’s delivered.  

Today it’s been announced that Telefonica is to take over German mobile operator E-Plus from KPN, a move that will shrink the German mobile market down to three networks from four.  To get regulatory agreement on this move Telefonica has committed to reserving up 30 per cent of its network capacity for Mobile Virtual Network Operators (MVNOs) and has already  announced that it will provide the network capacity to Drillisch. 

This three player Nirvana has done wonders in Austria - at least for the operators. Austria  saw immediate price rises but  so far no sign of the MVNO which was supposed to be put into place to mitigate the lack of real competition. 

But even if an MVNO does materialise to create the illusion of network competition, critics say having several choices for almost identical network services gets you nowhere.  What consumers need is for capacity to be wholesaled in its raw state, not bundled up into minutes or gigabytes. That gives the MVNO the opportunity to come up with radically new service propositions to create real price competition. 
 
So to get the consolidation approved Telefonica has undertaken to offer wholesale agreements based on an upfront fee for bandwidth rather than the current default, which is pay per use (thus shadowing the MNO's pricing structure and giving little room for innovative tariffing). 

Telefonica has also offered to sell spectrum and other assets to a new network operator or MVNO using the reserved capacity.

As initially announced, the takeover will involve a €5 billion cash payment to KPN and it will retain a 20.5 per cent stake in the merged entity. Telefonica will hold 62 per cent.

On the balance sheet anyway. For the moment, France Telecom says it’s had enough of the extended talks with its peers in the French mobile telecoms market on the sort of deal they might cut to consolidate down to the magic three players due to be engineered in Germany.

Orange says the deal-making is over and now it appears to be saying it will move players forward (sorry, extended football metaphor coming) to try and win the game instead of defensively trying to hatch a plot for the ‘sudden death’ elimination of one of the opposing teams. 

In a statement issued today Orange said it had “examined the possibilities of participating in an operation that would lead to consolidation in the French telecoms market, and believes that it cannot pursue this avenue at the present time as the conditions that the Group has set have not been met."

You can sense the frustration that must have been felt in the Orange board room as the inconclusive negotiations dragged on. Quite apart from anything else, large companies in long-term talks tend to stall as changes and initiatives are put on hold with managers waiting to see how the competitive landscape turns out. 

Observers say the new Orange stance could indicate a continuation of the price war that has been raging in France since the shock arrival of Iliad’s Free back in 2012. In confirmation, the stock prices of the four operators and/or their parents dropped on the news.