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Sources say European competition authorities are happy with asset sale concessions made by Hutchison and VimpelCom.
The European Commission’s competition regulators are poised to give the green light to CK Hutchison and VimpelCom’s plans to merge their mobile operations in Italy, it emerged late last week.
Brussels will clear the merger of 3 Italia and Wind, having agreed with concessions put forward by their parent companies that will ensure Italy has a new fourth mobile network operator, Reuters reported, citing two unnamed sources.
The sources’ claims came just days after France’s Iliad announced it has agreed to buy a portfolio of spectrum and network assets from the merged entity, thereby enabling it to enter the Italian market.
It appears that this will be enough for competition commissioner Margrethe Vestager and her colleagues to OK the €21.8 billion deal announced by Hutchison and VimpelCom in August last year.
Facilities-based competition has been key for Vestager since she took office in late 2014.
In September Telenor and Telia’s plan to merge their Danish operations fell apart because of Vestager’s insistence that the market required four mobile network operators to remain competitive. At the time, she stated that each M&A case would be judged on its own merits, but as time has passed it has become clear that the number of network operators in a country is more important to the Commission than market dynamics.
The Commission blocked Hutchison’s bid to acquire O2 in the U.K. in May on the grounds that reduced competition would lead to higher prices, despite major efforts by the telco to ink a series of capacity deals that would have made it easy for a handful of other players to offer mobile services.
Iliad will provide Italy with a new mobile operator, but there are questions over whether it will be able to bring genuine competition to the market, given that the disruptive model it adopted in France is unlikely to fit the bill in Italy, and bearing in mind that it would be a mobile-only player – initially, at least – in a market that is gradually moving towards quad-play and converged services.
Italian broadband operator Fastweb was also interested in acquiring the assets to be divested by the merged entity and this week called upon the European Commission to open a consultation into the Iliad deal.
With 2.2 million broadband access lines at the end of the first quarter, Fastweb is arguably in a better place to build up a credible competitor to Italy’s established players than Iliad will be as a new entrant.
According to regulator Agcom, Fastweb is Italy’s third largest provider of fixed access lines, with a market share of 11.1% at the end of last year, while its broadband market share stood at 14.8%.
Meanwhile, the regulator’s statistics show that a merged 3 Italia/Wind would serve 33.7% of the country’s mobile customers, putting it ahead of Telecom Italia’s TIM with 32.4% and Vodafone at 26.4%. That is a lot of ground for Iliad to make up, without an established presence or brand in the market.
Reuters’ report suggests that the European Commission could approve the 3 Italia/Wind deal soon. It has a deadline of 8 September to make a ruling.
