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Statement of Vice President Almunia on Commission conditional clearance decision approving aquisition of E-Plus (Germany) by Telefónica Deutschland (Germany)

European Commission - STATEMENT/14/218   02/07/2014

Other available languages: none

European Commission

Statement

Brussels, 2 July 2014

Statement of Vice President Almunia on Commission conditional clearance decision approving aquisition of E-Plus (Germany) by Telefónica Deutschland (Germany)

The Commission approved today the acquisition of E-Plus, a telecom network operator in Germany, by Telefónica Deutschland, subject to a number of conditions.

The commitments offered by Telefónica ensure that the merger will maintain effective competition although it reduces the number of independent mobile network operators in Germany from four to three.

But before I give you more details on this particular merger, let me make some general remarks on Europe’s mobile telecommunications markets

We don't have a single market for mobile telecommunications in the EU. Unfortunately, these markets are still national. Some players are global, but the markets where they operate continue to be national.

These national markets are also quite concentrated, with only a limited number of independent network operators in each EU country.

And the barriers to entry in these markets are high, owing to the limited availability of spectrum and the large investments required to build a mobile network.

In this context, the telecoms industry claims that consolidation efforts are needed to achieve economies of scale and help Europe’s mobile operators to invest in the development and roll-out of new technologies such as 4G.

Of course, these new technologies require significant investments. And these investments are needed to support innovation. We all agree on that.

But the fact is that telecoms markets in Europe remain fragmented. What is needed most of all is to eliminate the remaining national barriers. These barriers mainly relate to the national procedures for the allocation of spectrum and the lack of a single European regulatory framework. These barriers are also what sets Europe apart from countries such as the US and China. Fragmentation, and not the number of players in the EU, is the real problem.

It is for national governments and the European Parliament to push for the elimination of remaining barriers in order to complete the single telecoms market.

In the meantime, consolidation at national level should not occur at the expense of consumers. They should be able to choose between different mobile telephony providers and should enjoy competitive prices and innovative services.

Another issue is whether there is a direct link between consolidation and the investment incentives of mobile operators in the EU.

Let me point out that, at this stage, we do not observe an automatic link between those. This is why we analyse every merger in this sector on its own merits.

Now let me turn to the specific deal we approved today.

The acquisition of E-Plus by Telefónica would combine the number four mobile network operator in Germany, E-Plus, with the number three, Telefónica. The company resulting from the merger will have a market share roughly equivalent to the one held by each one of the other two MNO's, Deutsche Telekom and Vodafone. The merged company will also face competition from mobile virtual network operators – the so-called “MVNOs” – and service providers, which are hosted on the networks of the MNO's.

In our in-depth investigation we had concerns that the merger, as initially notified, would lessen competition on the retail market for mobile telecommunications services and on the wholesale market for access and call origination in Germany.

To remove those concerns, Telefónica submitted commitments based on three components:

First, Telefónica commits to sell upfront a given share of capacity on the network of the merged entity to one or several (up to three) MVNOs willing to offer mobile telecommunication services in Germany. The sale must occur before the acquisition is completed.

This component of the commitments – the “mobile bitstream access” part – constitutes the core of the package which addresses our competition concerns.

The relevant MVNOs will be able to access up to 30% of the total capacity of the merged company's network for up to ten years. This capacity roughly corresponds to a market share of 10% in terms of subscribers.

The upfront MVNOs will have access to all current and future technologies and speed classes for mobile data which Telefónica currently offers and will offer in the future. They will also be able to independently design their products and will therefore be better able to compete.

As they will also have to commit to purchase a significant amount of capacity in advance, the remedy will also create a strong incentive for these MVNOs to compete aggressively on the market, in order to acquire subscribers to fill the fixed amount of capacity that has been purchased on the merged entity’s network.

Secondly, Telefónica commits to offer to divest spectrum and make available certain assets and services either to a new MNO in the context of the upcoming frequency auctions, or subsequently to the MVNO(s) who have taken up the network capacity. The offer is available for all interested parties until the end of 2014 and will, after that, remain in place for the relevant MVNO(s) for up to five years from the date of the closing of the merger.

This will keep the door open to the entry of a new MNO into the German market in the future or it will allow the MVNO which has taken up the mobile bitstream access offer to develop into an MNO in the future.

Thirdly, Telefónica offers to extend all existing wholesale contracts with MVNOs and Service Providers until the end of 2025 and to provide 4G access to all interested players in the future.

The MVNOs who will have bought capacity upfront, together with the three remaining MNOs and the other non-MNO players, will be able to exercise a sufficient degree of competition on the German mobile telephony market.

The Commission has therefore concluded that the proposed merger, as modified by the commitments, no longer raises competition concerns.


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