The Norwegian Competition Authority (NCA or Konkurransetilsynet) has warned telecom operators TeliaSonera and Tele2 Norway that it is considering blocking their proposed merger. In July Swedish-based TeliaSonera announced its intention to buy Tele2 Norway for SEK 5.1 billion (US $687 million). The regulator said that the remedies submitted by TeliaSonera are not sufficient to allay its concerns. NCA Director General Christine Meyer pointed out that TeliaSonera’s acquisition of Tele2’s operations in Norway involves two of the three largest players in mobile telephony in the country (TeliaSonera owns Norwegian operator NetCom). She said the Norwegian mobile telecommunications market is already highly concentrated and that the deal reduces the number of mobile network operators from three to two, which the NCA fears that the acquisition will harm the competition climate, making higher prices and lower quality for consumers likely.
While we have seen mergers recently take the number of major operators in a market from four to three (such as in Austria, when 3 acquired Orange), going from three to two involves a more drastic increase in market share for the resulting entities. A duopoly is not what any regulator wants, so it comes as no surprise that the Norwegian competition authority has strong objections to the TeliaSonera-Tele2 deal, and it will also come as no surprise in the future if it quashes it. In fact, the merger plan seemed to us to be somewhat counterintuitive from the beginning for this very reason.
The parties have until 22 December to present their views to the NCA, which will make a final decision by 15 January 2015. TeliaSonera has promised that the synergies resulting from the merger will enable it to roll out LTE faster, and has committed itself to achieving 98 percent LTE coverage in Norway by 2016 if it is approved. However, given that full LTE coverage will eventually occur in any case, this argument does not appear very likely to sway the competition authority.
The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues or to speak with the research team: http://www.tarifica.com/contactus.aspx