BEREC Study Fails to Contribute Robust New Evidence on Mergers

The European regulator’s group BEREC recently entered the debate on the impact of mobile mergers by undertaking an evaluation of the most recent 4 to 3 mobile mergers in Europe (i.e. Austria, Germany and Ireland).

Overall the BEREC report finds that “there is at least some evidence that retail prices for new customers increased due to the merger compared to the situation without the merger” and points to “uncertain long-run effects” on quality.  However, we would argue that these findings fail to present strong evidence of mobile mergers driving higher prices, and do not properly address the impact of mergers on other quality-related aspects.

In respect to price:

  • In Austria, the results obtained for their highest consumption basket (with around 700 MB of data) are not robust, as pre-merger price levels in Austria were substantially lower compared to other countries in the analysis. Furthermore, the study fails to take into account the spectrum auction in late 2013, which could have driven the price trends observed;
  • In Ireland, for most periods and tariffs analysed, the study does not find a significant effect from the merger on prices;
  • In Germany, BEREC itself considers the evidence of prices increases for two of the three baskets “not very robust”; for low usage consumers, BEREC acknowledges that it did not include data for MVNOs, even though these account for approximately 20% of the German market, with a strong presence among low usage consumers.

When it comes to the impact on innovation and network quality, both hugely important for consumers, the BEREC report presents some basic trends in network quality in Austria and Germany. However, it does not demonstrate how the merger affected the observed trends and, for benchmarking purposes, it fails to compare network quality with other countries.

By contrast, the GSMA’s recent study on the impact of the Austrian merger found that it had significant positive impacts for Austrian consumers, with accelerated coverage of 4G by 15-30% and higher speeds for mobile broadband. In a separate study, the GSMA also finds consistent results for Latin America, with consumers in more concentrated markets in the region experiencing better network quality.

In its report, BEREC referenced and critiqued GSMA’s Austria merger study but its findings do not stand up to scrutiny:

  • Counter to GSMA analysis, BEREC argues that it is very unlikely that, in the first year after the merger, the merger drove network quality improvements. However, operators can improve network quality quickly, (e.g. upgrading to new equipment) – precisely the sort of pro-competitive effect that a merger can lead to.
  • BEREC notes that 4G coverage levels were low across Europe before the merger. This was indeed the case and, therefore, made it ideally suited for a comparative study of 4G roll-out in Austria vis à vis markets that experienced no consolidation.
  • BEREC also questions whether the pre-merger period is a good comparator for 4G roll-out after the merger in Austria given that 800MHz and 1800MHz spectrum was not available for 4G. The GSMA analysis however controlled for the effect of operators’ spectrum holdings.

In summary, the BEREC report does not add any significant finding to the existing body of evidence on the impact of mergers. It fails to convincingly dismiss past evidence on the positive impact of recent mergers, while not providing a convincing picture of higher prices for consumers in Austria, Ireland and Germany.