Vodafone’s purchase of Nowo will have “harmful effects” such as “price increases” | Telecommunications

If Vodafone’s purchase of Nowo goes ahead, “harmful effects” are to be expected for the functioning of the telecommunications market, concluded the sector’s regulatory authority.

In a note released this Wednesday, Anacom reveals that it sent to the Competition Authority (AdC) its opinion on the deal announced at the end of September by Vodafone and says that “the possible concentration operation should be accompanied by commitments that eliminate” some risks, such as “price increases” and a decrease in the level of competition in the market.

In particular, the entity chaired by João Cadete de Matos argues that the AdC should make “an in-depth assessment” of the deal which, as announced, could result in the “elimination of a competitor with competitive prices”. In order for the merger to take place, the AdC must impose the so-called “remedies”.

These remedies (commitments that the purchasing entity is willing to accept if it really wants to complete it) must include, “at least”, the return of the “Nowo spectrum that Vodafone could not bid on in the 2021 auction” because it was reserved only for companies still without mobile operation.

Other commitments may include “the assumption of the obligations that Vodafone would be bound to if it had acquired 100 MHz of spectrum in the 3.6 GHz band in the 2021 auction”, and “some type of commitment associated with the fixed network to avoid the reduction of capacity in the market”, points out Anacom.

One of the major problems identified by the regulator is that Vodafone would gain control over the spectrum whose bidding was prohibited in the 2021 auction and which, in addition, “would have less demanding network development obligations than those it would have had if it had obtained part of this spectrum” in this auction.

This “distorts the objectives and measures” that Anacom introduced in the auction and which aimed to favor the entry of new operators in the Portuguese market – more spectrum in the hands of Vodafone “may deny spectrum to new operations, or operations different from those of the main operators, preventing or slowing down the development of competition in the market”.

In this Wednesday’s communiqué, Anacom also explains that “Nowo is currently the provider that offers the lowest prices in a significant set of services and offers, fixed and mobile” – to offer mobile services, Nowo currently uses the network of Meo.

If Vodafone’s prices “are, in many cases, higher than those charged by Nowo, this operation may result in price increases for Vodafone and also for Nowo customers (after the respective contractually defined loyalty period)”, stresses Anacom .

On the other hand, “in the case of Vodafone customers, in areas where Nowo is present, they would no longer have an operator with lower prices as an alternative”. This absence “would result in a decrease in competitive pressure and, as such, could lead to a price increase”, adds Anacom.

Regarding Nowo’s customers, if they “wanted to change operators following a price increase”, they would not have “an alternative that offered prices similar to those currently practiced by Nowo”, justifies the regulator.

Anacom also recalls that the telecommunications market is characterized by “high barriers to entry, high concentration, homogeneity in terms of offers, reduced tariff differentiation, loyalty periods that create relevant obstacles to changing operators and high prices”.

In view of this situation, “the elimination of a competitor with competitive prices”, as is the case of Nowo, would reinforce a “symmetrical market structure”, enhancing “risks of a balance between operators with a level of competition lower than what could be already today”.