Connected Research

Union policy research in the 21st century

T-Orange in the pink – but unresolved issues remain

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The European Commission has today approved the joint venture between T-Mobile and Orange in the UK. The outcome had been heavily trailed in press speculation last weekend, and the concessions appear to be in line with what the papers were then discussing, i.e:

– specific protection for 3 UK regarding its own network joint venture with T-Mobile

– T-Mobile and Orange to give up 25% of their jointly held spectrum in the 1800 MHz band

Today was the last day, according to the European Commission procedure, for the decision to be made and, as a result, the Office of Fair Trading has also today withdrawn its request that the merger be referred to it.

The questions that remain appear to me to be as follows:

1. The Commission decision talks of the arrangements with 3 UK being necessary ‘to ensure that there remain sufficient competitors in the market’. If four is now ‘enough’, why has competition policy been geared towards establishing and maintaining a fifth operator in the market – not least in the light of the influence this requirement for an additional market entrant had on the auction for 3G spectrum in 2000 (and on the subsequent fall-out)? And what should happen in the light of four operators now being a ‘sufficient’ number were Vodafone to decide it wants to merge with 3 UK, as the two smallest operators in the UK market, as happened in Australia last June? [Edit 5 March: One analyst has already commented that such a deal would, in the wake of the T-Orange JV, be ‘competitively appropriate‘.]

2. According to the press speculation, 3 UK signed a deal with T-Mobile and Orange giving it access to 3,000 more sites to support its own network expansion. Part of the OFT’s fears of the impact of the merger on 3 were that it could end up facing severe jeopardy if T-Mobile and Orange were to switch customers on to the Orange network, running down maintenance on the T-Mobile network, allowing it to atrophy and thus undermining the critical quality component (para.67). With the greatest of respect to 3’s negotiators (and of course to commercial confidence), how do we know that the additional 3,000 T-Mobile and Orange sites to which it has just secured access will continue to be ‘viable’ ones into the future (i.e. that the OFT’s fears won’t end up being realised)?

3. The European Commission correctly points out that it is contiguous spectrum across frequency bands which offers the key to early implementation of LTE (so-called 4G) services. With it, T-Orange is in a clearly advantageous – a market leading, in fact – position. The concession of the 15MHz of spectrum that T-Orange has offered must, therefore, be done in such a way as to ensure that, afterwards, there is no such contiguous position (note here that the JV appears not to have had to go further than its initial offer, according to the press speculation). This could easily be achieved were the 15MHz of spectrum conceded to be that of one of the operators alone rather than from them both. It is clearly imaginable that point (2) above is also very much tied in with this.

4. Both the EC and the OFT press release contain clearly jointly-worded statements on the concessions doing enough to satisfy on the impact of the JV on competition. Even a cursory glance at the OFT’s request indicates that this was not the only (though of course it was the primary) concern: issues of subsidiarity also featured, for example. Other question marks around the approach to regulatory decision-making highlighted previously on these pages are also important.

And, finally – something may have been lost in the translation, but the competition issues are not yet ‘resolved’, in the words of Competition Commissioner Almunia: please note that crucial decisions and actions have to be taken before that can be proclaimed.

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Written by Calvin

01/03/2010 at 4:21 pm

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