Europe’s national regulators tend to like having at least four mobile network operators (MNOs). The more infrastructure competition there is, they reason, the more consumers are likely to benefit from lower prices and service innovation.
Ofcom, the UK telecoms regulator, bent over backwards to make sure 4G spectrum auction rules would result in at least four MNOs each having enough wireless frequencies to offer what it believes would be a “viable” high-speed data service nationwide. Other European Union (EU) national regulators have been equally assiduous in setting aside 4G spectrum for a fourth player. There are signs, however, that regulatory attitudes – both at a national and European level – are softening.
Ireland’s national regulator, ComReg, recently approved the sale of Telefonica’s Irish mobile operations to rival 3 Ireland, owned by Hong Kong conglomerate Hutchison Whampoa. True, the deal is still to be given the all-clear by the European Commission, EU’s anti-trust watchdog, but it shows ComReg is willing to move from four network operators to three.
In Austria, after lengthy consideration by both national and European authorities, France Telecom was eventually given the green light in December 2012 to sell its Orange Austria subsidiary to Hutchison’s 3 Austria. Again, it cuts down the number of MNOs in the country from four to three. And this time, importantly, it’s with Brussels’ blessing.
If regulators are not digging in their heels so firmly about having at least four MNOs, it owes more to pragmatism than any ideological shift. The reality, particularly when the economic climate is so tough, is surely that some markets simply can’t support four players.
Despite the limitations of ARPU (average revenue per user) as a metric for measuring operator performance – margins may well increase as revenue falls if there’s effective cost-cutting – its decline across Europe nonetheless tells a depressing story for operators.
According to Analysys Mason’s Telecom Matrix, monthly mobile ARPU fell on average by 4.5 per cent in Q2 2012 compared to Q2 2011 across 16 Western European countries.
ComReg says ARPU falls in Ireland are in line with this wider downward trend. Along with worsening economic conditions, increased sales of bundled products and reductions in roaming and mobile termination rates have all played their part in squeezing Ireland’s operators (Telefonica O2 Ireland’s revenue slumped by 12.2 per cent to €136 million during Q1 2013 compared with the previous three months.)
In the hyper-competitive (and very small) market of Austria – combined with a regulator eager on reducing retail and wholesale prices as much as possible – operators have similarly struggled. The mobile section in the 2012 Annual Review from RTR, Austria’s regulator, makes sober reading for operators. Despite strong growth in voice call minutes and texting during the fourth quarter, plus soaring growth in data volumes (22 per cent up compared with the third quarter), retail revenues from the mobile sector continue to fall. They totalled €576.9 million in the last quarter of 2012, which is a 3.5 per cent drop compared with the previous three months.
Regulators may not like the thought of creeping consolidation, but perhaps developments in Austria and Ireland show a growing realisation that it’s better to have fewer and stronger operators, capable of heavier mobile broadband investment, than more numerous and weaker ones.
Network-sharing, particularly on LTE, is also rising up corporate agendas. Again, there are signs that regulators will not necessarily be resistant, so long as competition is not compromised. Passive sharing – involving transmission towers and sites – is already common among 3G operators. But active sharing, such as sharing base stations and antennas, may well be a growing requirement of LTE players, provided the cost-savings are attractive enough to take the plunge.
Regulators, quite rightly, will want to make sure that any mergers or active-sharing deals will not lead to a slowing down of network investment and an increase in consumer prices. On the other hand, an insistence on having at least four MNOs – no matter what – hardly seems progressive in cash-strapped markets.