ERGER CONTROL POLICY AND INVESTMENT IN EUROPEAN MOBILE MARKETS
|Autor:|| PhDr. Goran Serdarević M.A., Foster, David|
|ISSN / ISBN:|
|Publikováno v:||CRESSE conference 2014|
|Klíčová slova:||regulace, hospodářská soutěž, investice, telekomunikace|
|Abstrakt:||There is an intense and ongoing debate on whether further mobile consolidation
in Europe is desirable or not. There have been calls for competition regulators
to adopt a less stringent approach to consolidation in Europe, as a necessary step
to support investment in rolling out next generation technology. The European
Commission has approached such arguments with some scepticism, in the
context of three recent proposed deals in Europe (Austria, Ireland and
There have been two main arguments in favour of consolidation put forward to
date. First, market analysts and investment banking commentators have argued
that there is a need for higher margins and cash-flow to fund greater investment.
Second, in the context of merger reviews, the parties have argued that mergers
would generate efficiency savings (particularly in relation to the roll out of new
technology) that will benefit the consumer.
The mobile industry is currently moving from third (3G) to fourth generation
(LTE/4G) mobile technology, and this requires significant investments. Whilst
there is a consensus that demand for data will grow, there is significant
uncertainty about the likely evolution of demand, partly as a result of the
economic slowdown in Europe and the much slower rate of recovery of the
telecoms sector in Europe compared to the US. In this paper we consider the
role of uncertainty in affecting investment decisions by developing a simple
model. We show that, if operators are making their investment decisions under
uncertainty about future demand, then a ‘strict’ merger policy regime risks
creating a barrier to exit that reduces firms’ incentives to undertake investments.
We then show that a relaxation of the “failing firm” test for merger clearance
could produce more efficient incentives to undertake risky investments and
potentially lead to lower prices for consumers.