The European Commission needs to severely overhaul its view of anti-trust matters and market dominance, having gone ahead and allowed the merger this week of Vodafone Netherlands and Liberty Global. It has also suspiciously blocked a request by the local competition regulator to review the deal.
In one move it has eliminated yet another fixed line provider, one backed by plenty of funding from the market in Vodafone, which was bound to have grown substantially over time, and at the same time, given the largest cable operator there by far, now branded as Ziggo, access to a quadruple play. Dominance in broadband lines was established by a merger completed 15 months ago between Ziggo and UPC, and now this deal will produce a dominant cellular provider, with close to 65% pay TV dominance, and all the content control that implies, with no Vodafone to come separately into the market to ease that control.
We are clear that previous European Commissioners would never have allowed the merger of Ziggo and UPC under Liberty Global in the past (they said so publicly), but the new breed of European, in particular Estonia’s Andrus Ansip, a chemical engineer by training with no economic qualifications, has overturned the clear minded competition work of previous Vice Presidents of the Commission. He also serves as VP of the Digital Single Market and previous illustrious holders of similar titles and identical roles were Viviane Redding, and Neelie Kroes, who we don’t believe would have ever allowed this deal or the previous one to close.
Mergers that allow cellular operators to fall to just two players are being blocked (Denmark) and even down to three (UK) because insufficient competition will be in evidence after the fact. What has been created is a monster – a subsidiary which can call on not one, but two multinational parents for cash, technology, management and financial support, and which is dominant in all three – cellular, fixed lines, and pay TV – in a market where every offer out there is a triple or quad play offer and has been for some time.
At Faultline we are at a loss to see why the Commission has been so heavy handed and biased in handing down this judgement, clearly against the public interest, which will almost certainly to lead to the bankruptcy of its incumbent telco or its sale, and a complete failure of competition in the country. Of course, if by Digital Single Market all that Ansip requires is that large companies are created who have influence over multiple European territories, then we can see that he may think he has achieved this right wing ideal, which is curious for someone that was once part of the local Communist party. But once Brexit is complete, this will be two companies which are not part of the EU, one American and one from the UK, controlling more than 50% of all communication in the Netherlands, and rising.
It is easy to see that having just two antagonists across the entire Quad play makes this an uncompetitive market and clearly the local regulator felt the same way, or why would the European Union have to deny it a say, and refuse to refer it there.
But the 50/50 joint venture will not end there. Next step might be to merge Virgin Media with Vodafone UK, or to put the two German subsidiaries together or just collude at arms-length on common strategies. Neither deal would reach anything like this level of market control, so they cannot be off the table.
The only intervention that the Commission felt it could make was to insist that Vodafone sells off its 120,000-line broadband business, primarily put together on the back of KPN leased fiber, prior to completing the deal. This is one of the fundamental problems of the European Union, because the German competition regulator would have intervened, and not take no for an answer, but tiny Holland must do as it’s told. So it one rule for dominant Germany, and one rule for everyone else.
It is true that the cellular market in the Netherlands also has T-Mobile and Tele2, but neither of these have fixed line infrastructure and cannot offer broadband or a quad play. KPN is supposed to have more cellular subscribers than Vodafone, but the last set of accounts suggest they are neck and neck at 5.2 million and 5 million to Vodafone, which when you add the 190,000 Ziggo lines, put them neck and neck. The closest is T-Mobile with 3.6 million, and as we say, this is falling, because it has no fixed lines to cement quad play deals.
There is a fantasist idea that once Vodafone Netherlands fixed line business is sold off, it can form that basis, with an MVNO of a quad play. Unless T-Mobile buys it and invests heavily in the way Vodafone was investing prior to this deal, there will be no takers for such measly gruel.
The European Commission had one final chance to force Vodafone to muscle up and take on both KPN and Liberty Global, and now that chance has gone.