The Commission has concerns that the transaction could lead to higher prices, less choice and reduced innovation for mobile customers in Italy.
Commissioner Margrethe Vestager, in charge of competition policy, said: "Mobile telecom services are increasingly important in our daily lives. We use our mobile phones not only to get in touch with our family and friends but also to read the news, shop online or check the train schedule. We need to make sure that the proposed transaction will not lead to higher prices or less choice in mobile services for Italian consumers".
The transaction would combine Vimpelcom's subsidiary WIND with Hutchison's subsidiary H3G, respectively the third and fourth largest operators in the Italian retail mobile telecommunications market. It would reduce the number of mobile network operators ("MNOs") in Italy from four to three. It would also create the largest player in terms of the number of subscribers, followed by two similar-sized mobile network operators, TIM and Vodafone.
The Commission's investigation
The Commission's initial market investigation identified the following main concerns:
- First, H3G and WIND currently compete against each other in the retail mobile telecommunications market in Italy. The Commission has concerns that the transaction would remove two important competitive forces and that the joint venture would have limited incentives to exercise significant competitive pressure on the remaining competitors. This would lead to higher prices and less investment in mobile telecommunications networks.
- Second, the transaction would reduce the number of MNOs that host mobile virtual network operators ("MVNOs"). MVNOs offer mobile telecoms services to final consumers through access to the physical network of MNOs. Prospective and existing MVNOs would have less choice of host networks and hence a weaker negotiating power to obtain favourable wholesale access terms.
- Third, the reduction in the number of competitors following the merger risks weakening competitive pressure and increasing the likelihood that MNOs would coordinate their competitive behaviour and raise prices on a sustainable basis on the retail and wholesale markets.
The Commission will now investigate in-depth the transaction to determine whether its competition concerns are confirmed. The Commission will in particular examine the extent to which the parties are close competitors, the market incentives that would be faced by the joint venture and the potential response of its competitors.
The transaction was notified to the Commission on 5 February 2016. The Commission now has 90 working days, until 10 August 2016, to take a decision.
The opening of an in-depth investigation does not prejudge the outcome of the investigation.
Hutchison operates in Italy, through its subsidiary H3G, offering mobile telecommunications services under the brand “3”.
VimpelCom operates in Italy through its subsidiary WIND, offering mobile telecommunications services under the "WIND" brand and fixed telecommunications services under the “Infostrada” brand.
There are only two other mobile network operators in Italy that are present on the retail mobile market, Vodafone and TIM. In addition to these four mobile network operators, there are a number of mobile virtual network operators currently active in the market, such as Fastweb and PosteMobile.
Merger control 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 the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
There are currently four other on-going phase II merger investigations:
- The proposed acquisition of Telefónica UK by Hutchison 3G UK, with a decision deadline on 19 May 2016.
- The proposed acquisition of Arianespace by Airbus Safran Launchers (ASL), with a decision deadline on 12 July 2016.
- The proposed acquisition of oilfield provider Baker Hughes by rival Halliburton; and
- The proposed acquisition of the Greek gas transmission system operator DESFA by the Azeri state oil company SOCAR.