The Netherlands Authority for Consumers and Markets (ACM) has blocked the deal in its current form, saying it could negatively impact market competition

KPN first announced their intention to purchase mobile virtual network operator (MVNO) Youfone back in June, with the deal worth roughly €200 million.

The proposed takeover immediately drew the attention of the Dutch competition regulator, who noted that the acquisition of the low-cost provider by incumbent KPN could significantly reduce competition in the budget segment of the mobile service market.

The ACM launched a formal investigation in September, seeking to determine the deal’s potential ramifications on the market, as well as whether other providers could fill the gap left by Youfone in the low-cost market segment.

Youfone is the third-largest independent MVNO in the Netherlands, with roughly 540,000 customers. The company had a market-leading 32% share of the postpaid MVNO market and a 16% market share of the prepaid market, as of Q1 this year.

Now, the ACM has concluded its initial investigation, concluding that the acquisition should be blocked due to competition concerns.

The regulator said that Youfone’s current rapid growth rate meant that its influence on market competition was stronger than its market share suggested, noting that it would be difficult for a new player to enter the market and replace Youfone with a comparable growth trajectory. The ACM also argued that the deal would disincentivise KPN, the largest mobile wholesaler in the country, to offer favourable wholesale conditions to MVNOs with a similar profile to Youfone.

KPN and Youfone will now have the opportunity to propose potential remedies to these competition concerns.

If the proposed solutions are deemed insufficient, the ACM will embark on a second, more detailed investigation, before ultimately ruling on the deal’s viability 13 weeks later.

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