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Summary

With the announcement of a merger between the Italian business unit of H3G (3) and Wind on August 6, 2015, competition regulators have a new case to look at. Despite the recent stance taken by the EU Commissioner for competition, Margrethe Vestager, who is wary of the current trend for consolidation in EU markets, the Italian case might not be a major concern.

Regulators could impose remedies related to spectrum holdings and access for MVNOs

At first glance, the announced merger between 3 and Wind in Italy could appear to be bad for retail prices because the three remaining competitors will each hold close to one-third of the market and might therefore not fight too hard to win more customers. As things stand, the Italian mobile market is led by Telecom Italia Mobile, with a share of 35.1% of subscribers. Vodafone follows with a 29.2% share, then Wind (25.1%) and, finally, 3 (10.6%). The merged entity would become the largest mobile player in the market.

The merger will also mean that all three mobile operators are also in the fixed connectivity business, which is still largely dominated by Telecom Italia with a 47.7% share in fixed broadband. Wind and Vodafone are some way behind, at 15.4% and 12.5% respectively. The merged entity may be able to compete more aggressively with offers combining fixed and mobile connectivity, exerting competitive pressure on the market. Fastweb might be the operator most concerned about the merger, because it has a 14.6% share in the fixed broadband market but only a small MVNO in the mobile market (less than 1% of total mobile subscriptions). However, its focus on the higher end of the broadband market (i.e., superfast broadband connections) could keep the company relatively safe.

Regulators will be keen to preserve competition in the market. Data released by the Italian regulator, AGCOM, shows that the prices of communications services in Italy are among the lowest in the EU; in particular, mobile services have experienced a constant downward trend since 2012. Competition authorities, both in Italy and in the EC, will therefore be keen to ensure that retail prices do not go up as a result of the merger.

Regulators will likely consider remedies around spectrum holdings. Imbalances will occur, particularly in the 2.1GHz and 2.6GHz band, where the merged entity will have significantly more spectrum than its counterparts. Furthermore, access to MVNOs could be part of the remedies needed for the regulators to authorize the merger. These businesses often rely on their ability to negotiate with multiple MNOs to obtain good access conditions.

Appendix

Further reading

Italy (Country Regulation Overview), TE0007-000858 (December 2014)

“Remedies imposed on the Orange–Jazztel merger are unlikely to hamper Orange’s potential to invest”, TE0007-000906 (May 2015)

Author

Luca Schiavoni, Senior Analyst, Regulation

luca.schiavoni@ovum.com

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