In the context of the proposed €1.3bn Hutchison/Orange Austria transaction, two different antitrust investigations will be conducted, according to a person close to the situation. The person confirmed that the main transaction, the acquisition of…
In the context of the proposed €1.3bn Hutchison/Orange Austria transaction, two different antitrust investigations will be conducted, according to a person close to the situation. The person confirmed that the main transaction, the acquisition of Orange Austria from France Telecom by Hutchison, will be investigated by the European Commission (EC).
But, in a separate review, the Austrian Competition Authority (BWB) will decide over the disposal of Orange-owned no frills brand Yesss! to Telekom Austria, a spokesperson for the Austrian regulator said.
Austrian competition lawyers said both reviews could be challenging in their own way, although none of the experts thought receiving clearance would be impossible.
The EC’s 2005 tele.ring investigation a prototype?
The EC has a history of giving mergers in the space of Austrian mobile operators a hard time: Back in 2005/6, the Brussels-based regulator opened an in-depth investigation into the proposed takeover of number four player tele.ring by number two T-Mobile Austria. The EC took seven months to clear the deal, subject to hefty conditions and obligations, including the divestment of UMTS frequencies and mobile telephony sites to operators with lower market shares.
Two antitrust lawyers warned that the EC would again take a close look at the proposed transaction, which would further reduce the number of players from currently four to three competitors.
However, the merging parties might be able to argue that a merged Orange/Hutchison would present a more credible competitor to the two leading operators, Telekom Austria’s A1, and T-Mobile’s local subsidiary.
Currently, A1 has a market share of 41%, and T-Mobile has 31%. Hutchison’s current market share of 9.5% will go up to 28% if the merger is successful.
“It all depends on the question of which view the EC follows,” one of the independent lawyers said. “You could argue that three strong players are better for a functioning market than four players, two of which are too weak to be credible competitors.”
But the separate disposal of Yesss!, certain frequencies and base station sites to Telekom Austria in a separate deal that appears to resemble the 2006 remedies in the tele.ring case, might appease the EC and make it easier to receive clearance.
The second lawyer said those ex-ante remedies, combined with detailed pre-notification talks with the Commission, might make it possible to avoid an in-depth investigation and to receive clearance at the end of phase I.
The spokesperson for Austrian regulator BWB, which will exchange views with Brussels about the deal, noted, however, that a reduction to three competitors would in any case require a detailed look. “It is not guaranteed that this deal will go through,” he said. “Some might think that this is even hard to imagine.”
The BWB investigation is more difficult than the EC’s review?
The BWB will, in any case, conduct its own review of the separate sale of assets, most importantly frequencies and the Yesss! budget brand, to market leader Telekom Austria. Although much smaller in value, this transaction might face an even tougher antitrust review, the independent lawyers warned.
The reasons are, the experts pointed out, that the buyer is already the market leader, with a market share of 41%. That means the acquisition of Yesss! would strengthen the former incumbent’s position even further, no matter how small Yesss!’s market share actually is.
But things could get even more difficult if the BWB decides to treat no-frills brands as existing in a separate market to that of the more traditional premium brands. In such a budget market, Telekom Austria would have a particularly high market share, because it already owns the only credible competitor to Yesss!, called bob.
The BWB spokesperson said it was too early to say what market definitions would be applied, and whether no frills brands could be seen as existing in a market of its own. “The market definition will be part of the overall analysis,” he said.
The person close to the transaction said that in the past only overall mobile phone markets had been investigated, and no differentiation between no-frills and premium had been made.
