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European Commission

Joaquín Almunia

Vice President of the European Commission responsible for Competition Policy

Introductory remarks on Hutchison 3G Austria/ Orange Austria merger decision

Press Conference

(Strasbourg)

12 December 2012

The Commission has approved today the acquisition of Orange Austria - the third largest Mobile Network Operator in Austria - by its rival Hutchison 3G. This approval is subject to a number of conditions which ensure that the merger will not harm competition.

Let me make some general remarks on Europe’s mobile telephony markets before I give you more details on the deal and the decision.

Unfortunately, we still have to talk of “Europe’s mobile telecommunications markets” in the plural, because these markets are still national.

Spectrum licenses are awarded on a country-per-country basis and the regulatory environment is country-specific. Cross-border communications are subject to roaming fees and telecom prices vary significantly between Member States. Although regrettable, the national scope of mobile telephony markets is a business reality. It means – for instance – that customers in Italy cannot switch to a Swedish provider.

These national markets are often highly concentrated, with only a limited number of network operators in each EU Member State. The barriers to entry in these markets are high owing to the limited availability of spectrum and the large investments required to build a network.

In this context, some operators claim that consolidation efforts should be allowed to achieve economies of scale and help Europe’s mobile operators invest in the development and roll-out of new technologies.

I am aware that these new technologies require significant investments and – as you know – I will always support innovation. I think consolidation at EU level, especially across national borders, can be a good thing if it brings new services, more choice and lower prices to customers.

However, we should also keep in mind that today, around 80% of mobile phone users in the EU are customers of the 4 biggest operators. So far, this cross-European parent ownership has not helped to develop a Single Market where customers purchase or user their services freely across national borders.

When consolidation takes place within the boundaries of an already concentrated national market, we should be careful about the potential harm to consumers in that country – since in mobile telephony, consumers are naturally in a vulnerable position when it comes to signing a contract with an operator. Incentives to innovate should also be preserved.

Moreover, we do not have evidence that operators will invest more if they reach a bigger size, as long as markets will remain fragmented along national borders. What we cannot do in any event is to give some companies a blank cheque to consolidate within their national borders and increase prices for consumers on the basis of mere promises of further investment.

I can also think of other ways than mergers to promote efficiency gains among operators, such as network-sharing agreements.

So, this is the broad picture. Now let me turn to the deal we approved today.

The acquisition of Orange by Hutchison 3G – or, as it is commonly known, "H3G" – brings the four mobile-network operators in Austria down to three. The company resulting from the merger will face only two competitors: the incumbent Telecom Austria and T-Mobile Austria. Virtual mobile network operators without a full own network – the so-called MVNOs – practically do not exist in Austria today.

Our in-depth investigation showed that without proper remedies, the market power of the new entity would have been very high. Today half of customers who are switching to a new supplier for their smartphones choose either Hutchison or Orange. While Hutchison is currently an important competitive force in the Austrian market, its incentive to continue to compete in such a way would have been reduced. In the end, our analysis, supported by thorough economic assessment, showed that the merger would have led to substantial price increases for Austrian consumers.

To address these concerns, Hutchison has offered the following remedies:

  1. First, the company commits to make spectrum available, which is a necessary condition for a new mobile network operator to enter Austria’s telecoms market.

  2. Second, Hutchison commits to make wholesale access available to up to 16 virtual operators without a full own network for the coming ten years.

  3. Third, Hutchison commits not to complete the acquisition of Orange before it enters into a wholesale access agreement with one virtual operator approved by the Commission.

These are significant remedies which, in the specific context of the Austrian market, address the competition concerns we had identified. They are also proportionate given that the new company will be smaller than the other two remaining competitors.

Our decision means that the door is now open to both groups of potential competitors:

  1. those who intend to provide immediately mobile services to end-customers without an own network; and

  2. those who, in the future, intend to offer mobile services and operate their own network. The spectrum made available by Hutchison combined with the spectrum reserved for a new entrant by the Austrian regulator will allow for a new sustainable competitor with long-term incentives to compete with the remaining three operators.

After reviewing these conditions, I concluded that, even following this merger, competition in this market will be preserved. This means that Austrian consumers will continue to enjoy innovative mobile telecoms services at an attractive price.


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