Disruptive Activity in a Regulated Industry by Curwen Peter;Whalley Jason;Vialle Pierre;

Author:Curwen, Peter;Whalley, Jason;Vialle, Pierre;
Language: eng
Format: epub
Publisher: Emerald Publishing Limited
Published: 2019-04-11T00:00:00+00:00

Conclusions

Driven by its new competition Commissioner, the Commission appears to have changed track somewhat in recent times and come out strongly in favour of fierce competition as the route to customer welfare via maintenance of the number of networks. It may be argued that this is better than market dominance by a duopoly, but that is hardly a fair comparison. At first sight, the UK did not look like a country where the erosion of competition was a serious threat – there were four networks backed by strong international companies, a strong MVNO (Virgin Mobile) and many other well-established rivals such as Tesco Mobile plus an interest expressed by fixed-wire broadband and TV networks to develop into quad-play networks. On top of which Hutchison promised to support the development of these competitors. Given that most other European countries in the above sample are happy with three networks, the suspicion must exist that one of the triggers behind the opposition by the Commission, supported by Ofcom, was the flexing of muscles by two new leaders eager to establish their authority.

In the USA, a much smaller market than the European Union let alone a Europe more broadly defined, there are only four nationwide networks. On the face of it, therefore, it makes little sense for the Commission to insist whenever it can that an individual member state should have the same number. The way the Commission gets around this is to argue that there are in total 80–90 networks in the USA, whereas in the EU, the four largest operators serve roughly 60% of customers overall – the rest are effectively regional in a pan-EU sense of the term. So it follows that the structures are not really all that different between the EU and the USA. However, this is disingenuous because a presence in even 12 EU member states (the current maximum for a single operator) hardly represents a ‘nationwide’ EU operator comparable to the US ‘big four’. 2

Once it has been determined by the Commission that four networks should remain in existence, the only way in which this number can be reduced is for one of the networks to close shop because it is continuously losing money. Ironically, Hutchison was in precisely that situation until very recently (Whalley & Curwen, 2016) but having traded through those losses and seen its performance improve significantly; it would be surprising if it now threw in the towel in either the UK or Italy.

By and large, there is always going to be some interest in buying the unprofitable smallest operators. However, this interest is going to come either from the likes of broadband or pay TV operators seeking to add infrastructure-based mobile to their service provision or from financial intermediaries (which may turn out to be as keen on asset-stripping as building up the business). Predictably, the potential buyers tend to place very low values on the networks for sale which is why, for example, Yoigo was available for a lengthy period before eventually being acquired in June 2016.

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