BEREC Report on Post-Merger Market Developments -Price Effects of Mobile Mergers in Austria, Ireland and Germany

Document number: BoR (18) 119
Document date: 15.06.2018
Date of registration: 20.06.2018
Document type: Reports
Author: BEREC

Over the past ten years, several mergers or acquisitions (M&As) have taken place in the telecommuni­cations sector in Europe. Such M&As can have a significant effect on market structure and competitive dynamics, which is particularly the case in the mobile markets, where the number of operators with their own network (mobile network operators, or MNOs) is generally quite low (three to five in most cases) and entry barriers are high.

M&As can have either positive or negative consequences for competition and consumers. A merger can result in a stronger, more competitive, innovative or efficient entity. If competition in the market remains sufficiently high, efficiencies may be passed on to the end user and prices may decrease. However, a merger can also result in an increase in market power by one or several firms, which may lead to higher prices, as well as a decrease in quality and innovation.

Takeovers in the EU are generally subject to merger control by national competition authorities or, if the merger is beyond a certain size, by the European Commission, in order to avoid consumer harm due to reduced competition. Where negative outcomes of a certain transaction are expected, the merger can be prohibited or can be allowed only with commitments (remedies), such as wholesale access agreements or divestment of parts of the merged entity.

Such ex-ante merger control tries to gauge the effects of a merger on prices or quality based on past data and assumptions about future behaviour. Since it is difficult to predict future behaviour, there is an increasing interest in ex-post merger evaluation studies. Such studies attempt to estimate the actual effect of a merger on prices, investments or quality. In doing so, the developments after the merger are usually compared to some kind of counterfactual, such as how certain metrics would have developed without the merger. Such studies are important, since they show how the decision actually influenced the market and allow lessons to be learned for future cases.

This report contributes to the literature on the estimation of post-merger price effects.