European Commission clears acquisition of Austrian mobile phone operator Orange by Hutchison 3G subject to conditions

On 12 December 2012 the European Commission approved under the EC Merger Regulation the proposed acquisition of Orange’s mobile telephony business in Austria by Hutchison 3G (“H3G”) subject to conditions. The commitment package is aimed at facilitating the entry of new players in the relevant Austrian mobile telecommunications market.

In May 2012 H3G notified the proposed acquisition to the Commission. In June 2012 the Commission opened an in-depth investigation and a statement of objections was adopted on 20 September 2012. The Commission’s investigation is focussed on the Austrian market for mobile telecommunications services to end consumers.

The market for mobile telecoms in Austria is highly concentrated and the proposed merger would bring together two of the four mobile network providers in Austria. Furthermore, this market is characterized by high barriers to entry and little bargaining power for consumers when negotiating contracts with the operators. The Commission came to the conclusion that the market power of H3G and Orange under the proposed acquisition was higher than what their market shares suggested. Accordingly, the Commission was concerned that the proposed acquisition of Orange by H3G would result in higher prices and the reduction of competition.

H3G submitted a commitment package to remove the concerns of the Commission.

As a structural remedy H3G committed to divest its radio spectrum and additional rights to a new entrant in the relevant Austrian mobile telephony market. Additionally, the new mobile network operator will have the right to acquire spectrum from H3G and additional spectrum at an auction planned by the Austrian telecom regulator in 2013. The Austrian telecom regulator will reserve spectrum for this new entrant to make sure it can build up a physical network for mobile telecommunication services. Furthermore, the new entrant will receive better conditions when purchasing sites to build up its network.

Regarding access, H3G committed to provide – for the next 10 years – wholesale access to its network for up to 30% of its capacity to up to 16 mobile virtual network operators. This serves to enable such operators to offer their services to end consumers at competitive terms and conditions.

As an up-front commitment H3G agreed not to complete the merger before it has entered into a wholesale access agreement with a mobile virtual network operator.

These commitments are supposed to lower barriers to entry for mobile virtual network operators to ensure that competition in the Austrian mobile telecoms market will be safeguarded.

According to Competition Commissioner Almunia he always supports innovation and new technologies require significant investments. Accordingly, consolidation at the EU level can be good if it “brings new services, more choice and lower prices to customers.”

Since the Commission cleared the merger the Austrian Competition Authority will not appeal against the decision of the Austrian Competition Court which allowed the merger. [Nicole Daniel]