European Commission Approves Acquisition of Orange Austria by Hutchison 3G
The European Commission has approved the proposed acquisition of Orange Austria by Hutchison 3G (H3G). The approval is conditional as the Commission had concerns that the elimination of one out of only four mobile network operators in Austria could have led to less competition and higher prices.
To address these concerns, H3G submitted remedies, offering in particular to divest radio spectrum and related rights and to provide wholesale access to its network. In light of these commitments, the Commission concluded that the transaction would no longer raise competition concerns.
The proposed merger would bring together two of the four mobile network operators in Austria and the merged entity would face competition only from Telecom Austria and T-Mobile as primary physical network operators.
The economic analysis conducted by the Commission, taking into account the parties' particular strength in the private customer and data market segments, has shown that the market power of the merging parties would have been higher than what their market shares suggested.
The Commission was concerned that the transaction in its original form would lead to higher prices and a reduction of competition. To remove the Commission's concerns, H3G submitted a package of commitments:
H3G commits to divest radio spectrum and additional rights to an interested new entrant in the Austrian mobile telephony market. The potential new mobile network operator (MNO) will have the right to acquire spectrum not only from H3G but also additional spectrum at an auction planned in 2013 by the Austrian telecom regulator. The latter will reserve spectrum for a new entrant, in order to enable such an operator to build up a physical network for mobile telecommunication services in Austria. The new entrant will also benefit from privileged conditions for the purchase of sites for building up its own network in Austria.
H3G commits to provide, on agreed terms, wholesale access to its network for up to 30% of its capacity to up to 16 mobile virtual network operators (MVNOs) in the coming 10 years.
An up-front commitment ensures that H3G will not complete the acquisition of Orange before it has entered into such a wholesale access agreement with one MVNO.
In light of these commitments, the Commission concluded that the transaction would no longer raise competition concerns.