Assessing the case for in-country mobile consolidation in emerging markets

This study, commissioned by the GSMA and authored by Frontier Economics, considers the question of, under what circumstances, a reduction in the number of mobile operators in an emerging market might benefit consumers and how, therefore, the public authorities in those markets should approach such proposals.

The study considers mobile mergers that have taken place in recent years in Chile, Argentina, Uganda and Indonesia. These were either 5-to-4 or 4-to-3 mergers. It also considers an attempted mobile merger in El Salvador that was blocked. In all of these cases, public authorities have been concerned that the merger could lead to higher prices for consumers. In doing so, they have tended to focus more on short-term price effects, whilst taking different views on the likelihood of efficiency gains as a result of a merger. However, the mobile industry is characterised by frequent technology cycles, with each new generation of technology delivering a significant increase in speed and capacity. This drives reductions in the costs of delivering services which in turn lead to lower prices and increases in demand and volumes. Empirical analysis suggests that it is these dynamic efficiencies arising from investments in new mobile technologies that have been by far the most important driver of price reductions in emerging markets over the last 10 years.

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