Global Competition Review Quotes Davina Garrod on European Telecom Merger

Davina Garrod, a partner in Akin Gump’s international trade practice, is quoted in the Global Competition Review article “Telenet/BASE merger goes to Phase II,” regarding the proposed merger between Belgium’s BASE, a subsidiary of Dutch telecom group KPN, and Telenet, a mobile virtual network operator owned by Liberty Global. As the article notes, the European Commission (EC) is investigating whether a tie-up between the two companies would lead to higher prices and fewer choices for consumers.

Garrod said the decision to launch an in-depth investigation shows that the EC is looking very carefully at all types of telecom deals, and not just the classic “four-to-three” merger at the network level. She said, “Liberty Global’s mobile operator isn’t a network operator – it’s an MVNO, and so the commission is looking at the overlap at the retail level, in addition to vertical aspects. This will be the first time that the commission has had a material horizontal issue with the acquisition of an MVNO.”

Garrod observed that the two companies are said to have offered commitments that could address the commission’s concern that the deal could worsen conditions for virtual operators seeking to use BASE’s network, but the authority likely has not yet had sufficient time to market test the effectiveness of the proposed remedy. “Ultimately,” she said, “I’m confident that an effective MVNO remedy can be negotiated in the Phase II after more time is dedicated to it.”

There has been an increase in consolidations, Garrod noted, that either give rise to or reinforce a duopoly in markets and this is one of the main complaints against the deal by Mobistar, Liberty’s major network rival, since the deal may reinforce Liberty’s position in several markets, including a hypothetical market for multi-play where Belgacom is also very strong. Behind the scenes, she said, there is a lot going on “within the commission and BEREC [Body of European Regulators of Electronic Communications] regarding how to deal with the creation or reinforcement of telecoms duopolies going forward.”

Regulators of the telecom sectors, Garrod said, have been consulting on if and how to regulate oligopolies and duopolies, as those considered to have significant market power have faced greater competitive constraints from cable and other operators. The director-general of competition for the EC, she pointed out, “appears to be more supportive of using competition law to address this, as opposed to reverting back to the greater sector-specific regulation that we saw pre-liberalization.” The commission will have three months to make a decision.