Preparación y ajuste del modelo

In order to see from a more practical and tangible perspective, what impacts entry and consolidation may have had on mobile market structures, we have conducted four case studies – each of which seeks to explore specific aspects of mobile market developments.

 Austria offers an opportunity to examine – at least in the short term – the effects of a four-to-three merger. The Austrian case has also sparked a debate about price effects of consolidation, which we discuss further.

 Germany is a market which has been characterized by strong MVNO presence. In this case, we examine the role played by the MVNOs prior to the recently approved 4-3 merger, and what role they may play following the merger and associated remedies – which mandated the introduction of a capacity-based MVNO arrangement.

 Ireland allows us to explore the effect on consumer outcomes (and especially data pricing and usage) from the entry of a maverick, and to assess whether the market structure was economically viable in the Irish context. The players involved in the Irish consolidation mirror the planned 4-3 consolidation in the UK.  The Netherlands provides an example in which consolidation was followed by new entry, with the reservation of spectrum for a new entrant in the 4G spectrum auction.

It should be noted in advance that each market has specific features, and therefore not all observations are necessarily relevant to the UK. However, we seek to understand whether these cases may shed light on the effects of entry and consolidation – including the role that mavericks and MVNOs may play in shaping market outcomes.

5.1 Austria

5.1.1 Consolidation in the Austrian mobile market

Until 2012 the Austrian mobile market consisted of four MNOs. In this year, the two smaller players in the market, Hutchison-3G (H3G) and Orange Austria, merged. In its review, the Commission voiced concerns that the elimination of one out of four mobile network operators would lead to less competition and higher prices, to the detriment of consumers. The Commission regarded the merging parties as close competitors, which was one of the factors that made a significant impediment to effective competition likely. The Commission predicted increases in quality-adjusted prices as a result of the merger in the order of 10–20% in the post-paid residential market segment.41 _{H3G was viewed}

as an important driving force of competition in the market (“maverick”) and the Commission feared that their incentive to compete with the market leaders A1 Telekom Austria and T-Mobile Austria would be reduced as a result of the merger.

To overcome the concerns of the Commission H3G agreed to the following commitments:42

 H3G committed to divest spectrum (2x10MHz in the 2.6GHz band) to a potential new entrant. For this potential new entrant, the Austrian regulator also set aside additional spectrum in the subsequent 2013 multiband auction.

 H3G also committed to provide, on agreed terms, wholesale access to its network for up to 30% of its capacity for up to 16 mobile MVNOs over the following decade in case there was no new entry by an MNO. H3G committed not to complete the acquisition of Orange Austria before it had entered into a wholesale access agreement with one MVNO.

5.1.2 Competition

The H3G/Orange merger reduced the number of players from 4 to 3 and led to an increase of the HHI of almost 50043_{. This reversed the previous downward trend in the}

HHI as Figure 22 shows. Between 2006 and 2012, the HHI declined, reflecting that the two smaller MNOs were able to increase their market share at the expense of A1 Telekom Austria and T-Mobile Austria.

Figure 22: Herfindahl-Hirschman-Index (HHI) in Austrian mobile market, 2005- 2014

Source: WIK based on New Street

42 _{European Commission (2012), para. 518-553.}

H3G is unlikely to continue to play a challenger role after its merger with Orange. Due to its size, the merged entity no longer has such incentives. The merger created a more symmetric market structure as Figure 23 illustrates. More symmetric market shares and the disappearance of a maverick have deteriorated competitive conditions.

Figure 23: Market shares based on subscribers in Austrian mobile market, 2005-2014

Source: WIK based on New Street

The merger commitments provided by H3G were insufficient to keep the previous level of competition.

 First, the commitment to divest spectrum in the 2.6GHz band to a potential new entrant proved to be of little value, as no such entrant materialised.44

 Second, the commitment to provide wholesale access to MVNOs for up to 30% of its capacity for up to 16 mobile MVNOs worked poorly. Although an up-front commitment between H3G and an MVNO (UPC) was quickly reached in 2012, it took almost two years after the merger for UPC to launch a mobile offer. Only today further MVNOs are planning to enter the market using H3G’s network, such as Tele2.

5.1.3 Profitability

In the years prior to the merger, the EBITDA margins were linked to market shares: The market leader A1 Telekom Austria had the highest EBITDA/revenue ratio followed by T- Mobile, Orange and H3G. However, the profitability differences between the four operators narrowed down until 2012. Following the merger, which increased H3G’s