Spain’s telecoms market looks set to see consolidation this year as reports continue to link number four operator Yoigo with a sale to France Telecom’s Orange Spain.
While France Telecom reportedly haggles with TeliaSonera over the price – the…
Spain’s telecoms market looks set to see consolidation this year as reports continue to link number four operator Yoigo with a sale to France Telecom’s Orange Spain.
While France Telecom reportedly haggles with TeliaSonera over the price – the Swedish telco wants €1bn while Orange is said to offer €800m – it will also be considering the antitrust implications of the acquisition.
Given the size of the combined revenues of the two operators it would seem certain that the European Commission, which also investigated the recent sale of Orange Austria to Hutchison, would deal with this transaction.
The landmark Orange Austria ruling by the EC set a new precedent for the amount of remedies companies are required to offer in national markets where a merger would reduce the number of mobile players from four to three. Antitrust experts said that the Orange Austria decision implies that an acquisition of Yoigo may also come with stringent conditions.
The EC required Hutchison to divest radio spectrum and additional rights to an interested new entrant in the Austrian mobile telephony market. This new operator will have the right to acquire spectrum not only from Hutchison but also additional spectrum at an auction planned later this year by the Austrian telecoms regulator.
Furthermore, Hutchison agreed to offer wholesale access to its network for up to 30% of its capacity to up to 16 MVNOs in the coming 10 years. “From a regulatory perspective [a Yoigo/France Telecom transaction] is not exactly the same as the Austrian case, but it is very similar,” says Raul Rubio, a partner at law firm Baker & McKenzie.
“It is not the same because Yoigo’s market share is less relevant than Orange Austria’s.”
Indeed, Yoigo has around 6% of the Spanish market and it is up for debate as to whether or not it is a serious competitor to Telefonica, Vodafone and Orange. Orange Austria, in comparison, has a market share of 17.5% according to the local telecoms regulator, and its buyer, Hutchison Austria, takes more than 11%. If Orange Spain bought Yoigo it would result in a combined market share of more than 25%, in the country, about the same size as current number two Vodafone.
“For [Spanish telecoms regulator] the CMT, Yoigo is a potential competitor as it offers wholesale services,” explained Adela Gomez, senior European counsel at Bird & Bird. “But for [Spanish antitrust authority] the CNC it is not a credible competitor and is not putting pressure on Telefonica, Vodafone and Orange.”
However, Yoigo – along with MVNOs – have been taking subscribers away from the big three players which some might use as an argument to say that the number four operator is keeping the market competitive.
Yet others argue that customers have gravitated to Yoigo’s cheap and cheerful service because of Spain’s unprecedented economic woes. In a “normal” economic environment the smaller operator would not be a challenger brand.
In spite of this Telefonica, Vodafone and Orange dominate the market and in principal moving from four operators to three carries with it competition risks, such as higher prices and less consumer choice.
“I think that it is very likely that, in light of the Orange/Hutchison decision, remedies would be required,” said Gomez.
She explained that in order to satisfy the authorities France Telecom would probably have to offer to divest spectrum licences and provide further access on its network for MVNOs – similar to remedies Hutchison had to commit to in the Orange Austria case.
Rubio thinks the CMT might require Orange and Yoigo to divest a sufficient number of licences to allow a new player to enter the market.
“It is something that has happened in Austria and it could happen here,” Rubio said.
Spain also has spectrum arising from the digital dividend coming to market soon. It will be available for use in January 2014 and may aid a new player entering the market. However, Rubio cautioned that Yoigo’s existing frequencies are of poor quality and would not be attractive to a new entrant.
“If the CMT obliges Orange to give back good frequencies, and you mix that with spectrum from the digital dividend, it could be more attractive to potential investors. If not I think it is very difficult.”
A high-level Spanish industry source agreed. Speaking to TelecomFinance the source suggested that Orange would have to offer a set of remedies similar to what was offered in Austria, otherwise the operator would run the risk of the deal being turned down or, more importantly, have the process drag on for months.
