- Combined company with only 25 percent market share and remains #3 in the market
- Stronger competition in fiber and in the growing FMC segment
- Clear customer benefits backed by tangible promises
- Accelerated path to world class 5G network
The European Commission (“Commission”) has taken the next step in the ongoing investigation into the merger of Deutsche Telekom’s and Tele2’s telecommunication operations in the Netherlands by addressing a “Statement of objections” to the two companies.
In its preliminary analysis the Commission raises competition concerns about the effect of the merger on the mobile retail market, notably in the private segment. In essence, the Commission is arguing that the combination of number 3 (T-Mobile NL) and number 4 (Tele2 NL) is likely to lead to price increases.
The companies involved in the merger disagree with these concerns mainly for the following reasons:
- First, this is a merger of two small players with a post-merger market share of approx. 25 percent of the mobile customers in the Netherlands, still behind the current number 1 and 2 in the market.
- Second, competition in the Dutch consumer mobile market is heavily driven by the mobile discounts offered by KPN and VodafoneZiggo as part of their fixed-mobile bundle offerings.
- Third, this is not a traditional 4-to-3 merger, since Tele2 NL is to a large extent dependent on the network of T-Mobile NL to offer its mobile services. This merger would rather create a 3rd sustainable player in the key segment of fixed-mobile services while continuing the intense level of competition in the mobile market.
- Fourth, the new company would have the scale to effectively counter the dominance of KPN and VodafoneZiggo who are currently unchallenged in their ability to raise fixed broadband prices in the Dutch market.
In light of the narrow concerns identified, T-Mobile NL and Tele2 NL firmly believe the merger will be beneficial for Dutch consumers and have translated merger specific efficiencies into tangible promises: https://newsroom.t-mobile.nl/promises-go-politics/. By combining the assets of T-Mobile NL and Tele2 NL the parties are able to create a nationwide world class 5G network much faster. The merger will not only ensure that consumers benefit from stronger competition, it will also contribute to the position of the Netherlands as a digital leader in Europe.
The Dutch Regulator ACM in his most recent consultation has clearly identified the risk of joint dominance of KPN and VodafoneZiggo on the fixed market. A sustainable 3rd mobile led FMC operator is a much better and faster way to counter the associated risks of joint dominance than the current ACM proposal of uncertain cable access regulation which may take years to be implemented.
It is especially disappointing that despite all the time the process has taken and the voluminous amount of information provided, the Commission has failed to recognize the dynamic efficiencies that are generated by this merger.
The window of opportunity for a third converged player to emerge in the Netherlands is closing, and it is closing fast.
Around the world, investors in infrastructure will be closely watching the T-Mobile NL/Tele2 NL merger proceeding and will attribute high significance to its outcome for their own decisions. Europe has been falling behind the US and Asian telco markets for years resulting in a massive drain of capital. The sector trades at 10-year lows as a consequence of rising investment needs for next generation communication networks, without corresponding opportunities to earn a fair return. This merger is a unique opportunity for the European Commission to prove that it is not fixated on a “magic number” of 4 players in each market, but is willing to support a transaction that substantially accelerates 5G for the Netherlands and unlocks further fiber investments in a market with two dominant converged players, for the unambiguous benefit of Dutch consumers.
Against this background, the companies will continue a constructive dialogue with the Commission and remain confident that the merger will ultimately be approved towards the end of the year.
Disclaimer
This media information contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. They are generally identified by the words "expect," "anticipate," "believe," "intend," "estimate," "aim," "goal," "plan," "will," "seek," "outlook" or similar expressions and include generally any information that relates to expectations or targets for revenue, adjusted EBITDA, EBITDA, or other performance measures. Forward-looking statements are based on current plans, estimates, and projections. They should therefore be considered with caution. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom's control. If these risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, the actual results may be materially different from those expressed or implied by such statements. Deutsche Telekom can offer no assurance that its expectations or targets will be met. Without prejudice to existing obligations under capital market law, Deutsche Telekom does not assume any obligation to update forward-looking statements to account for new information or future events or anything else.
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