Irish mobile network merger given clearance

Ian Scales
By Ian Scales

May 30, 2014

Joaquin Almunia © Janwikifoto [CC-BY-SA-3.0]

Joaquin Almunia © Janwikifoto [CC-BY-SA-3.0]

The EU competition commissioner, Joaquín Almunia, has cleared Hutchison Whampoa’s takeover of O2 Ireland - Germany next? 

While most of Europe’s mobile operators will cheer the move as a welcome precedent for further in-country consolidation in Europe, it does come with a string attached - as might, on this basis, the proposed Telefonica takeover of E-Plus in Germany, due to be decided next.
The main condition of the merger, which will propel 3 (Hutchison Whampoa) to the number two position in Ireland with 40 per cent of the market  -  just behind Vodafone - is that the new entity must establish two MVNOs on its network which could use up to one third of its bandwidth.
The idea is that this remedy would replace the competitive pressure lost when the current four network market slips down to just three players, by introducing another, virtual, player. 
Critics of this approach argue that MVNOs are too easily controlled by their host operator and usually don’t have the pricing flexibility to mount any sort of disruptive challenge. Certainly the MVNO concept has been championed by MNOs as a way to reach parts of the market their mainstream brands can’t reach without too much cannibalisation.

That proves it’s possible to have friendly MVNOs - whether a regulatory environment can always foster a full-on competitive MVNO is slightly more questionable. 
Still, Vodafone seems to think it certainly can and that the Irish settlement, if pushed through, will disadvantage it unfairly.  Vodafone points that a set of advantageous, regulator-overseen MVNO conditions mean that in this case the virtual operator gets all the advantages of the network operator without having to make any infrastructure investment. That, it says, might put off other companies wanting to invest in the  infrastructure and harm the long-term health of the industry. 
Vodafone points out that it plans to invest US$749 on its infrastructure in Ireland over the next three years as part of its Project Spring.  
Certainly this remedy seems to push the concept of service/infrastructure separation .
Consider: any MVNO established by this remedy in Ireland can also use the position  as an on- ramp to full operator status by winning spectrum in later auctions. So it could build its own network or, alternatively, make a contribution to the host network’s spectrum pot so that what was a classic MNO/MVNO relationship is starting to look more like a shared/jointly-owned network arrangement.

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