12 April 2019

What can we learn from M&A transaction remedies that were imposed in the telecoms sector over the last decade?

Competition regulators have suggested and imposed a wide variety of remedies on transactions in the telecoms sector to protect the end consumer by promoting market competition. We have analysed the remedies imposed on some of the most significant European and North American M&A transactions in the past decade. We split these into fixed-mobile (vertical) and mobile-mobile (horizontal) transactions and have considered the main lessons that can be learned from these.

Fixed-mobile transactions

Looking at the five major fixed-mobile transactions that have cleared over the past decade, we can see that few remedies were imposed by the competition authorities. The remedies that were imposed were mainly related to ensuring service continuity and to the divestment of overlapping services:

  • Service continuity: In Belgium, Telenet was required to honour existing MVNO agreements that were previously negotiated with Base.
  • Divestment of overlapping services: In the Netherlands, Vodafone had to divest its premium film channel Film1 and terminate any agreement with broadcasters that restricted their ability to offer channels and content via Over-The-Top (OTT) TV services. In addition, it was forced not to sign any such exclusive agreements in the future.
  • Other remedies: In Portugal, Zon was required to enter into a fibre sharing agreement with Vodafone, ahead of its acquisition of mobile operator Optimus.
  • No remedies:
    • In the UK, BT’s acquisition of EE cleared without any remedies being imposed by either the UK competition authority or the European Commission (EC).
    • In the US, AT&T’s acquisition of Time Warner got the green light, without any major remedies being imposed. This was despite concerns from the Department of Justice (DoJ) that AT&T would have much greater bargaining leverage over rival TV distributors and could have the power to raise the prices that its competitors pay for its content.

Figure 1: Remedies imposed on fixed-mobile (vertical) transactions

Mobile-mobile transactions

Remedies imposed on the main mobile-mobile transactions that have cleared since 2012 were more stringent when compared to those imposed on fixed-mobile transactions. Notably, all the below transactions resulted in the merged entity relinquishing the spectrum, and most of them also had remedies relating to the provision of wholesale capacity to MVNOs. We focus on the Italian and US cases in more detail below. We focus on these two transactions because for Italy, it illustrates the impact of such remedies on facilitating market entry. For the US, it shows the contrast of remedies imposed on AT&T’s fixed-fixed and fixed-mobile transactions.

In Italy, for the Joint Venture between H3G and Wind to be approved, the joint entity had remedies imposed that would facilitate the entry of a fourth player to the market (Iliad):

  • divest spectrum in the 900MHz, 1800MHz, 2100MHz, and 2600MHz bands
  • transfer (or share) several thousand mobile base stations to the fourth player
  • provide a transitional roaming agreement whereby the fourth player would be able to use the merged entity’s network to provide services to customers until it rolled out its own network.

In the US, the AT&T/Leap Wireless transaction had multiple remedies imposed on it ahead of it getting regulatory approval, these remedies included commitments from AT&T to:

  • divest spectrum in certain geographic regions
  • deploy LTE services using unused Leap spectrum
  • build out LTE services in six specific markets
  • offer certain service plans targeted to help value-conscious customers
  • offer a device trade-in programme
  • honour existing CDMA roaming agreements
  • provide the FCC with quarterly reports on the status of its commitments.

In addition to those two cases, the below table lists the main remedies that were imposed in the context of the main mobile-mobile transactions that occurred in Europe and North America over the last decade.

Figure 2: Remedies imposed on mobile-mobile (horizontal) transactions

Lessons learned

Competition authorities have been more willing to approve fixed-mobile (vertical) rather than mobile-mobile (horizontal) transactions, as the former are arguably less likely to result in a significant loss of competition in the respective markets.

This has led the authorities to impose more lenient remedies on fixed-mobile transactions. Remedies in those cases were either focused on the divestment of overlapping assets/services (which were usually not material) or on ensuring service continuity (assurances that were not costly to provide).

In the case of mobile-mobile mergers, competition authorities have imposed more extensive remedies. Typically, these have included:

  • divesting assets (spectrum and/or sites)
  • offering wholesale capacity by the merged entity to MVNOs
  • offering national roaming agreements by the merged entity to a new entrant
  • committing to expand cellular coverage into specific areas
  • offering device trade-in credit to acquired legacy customers (if legacy network is discontinued).

This contrast in remedies is particularly striking when comparing the lenient remedies imposed on AT&T in its fixed-mobile transaction (vertical acquisition of Time Warner) compared to the significantly more stringent remedies in its mobile-mobile transactions (horizontal acquisition of Leap Wireless).

These stricter remedies are designed to protect consumers; however, they can negatively impact investors (e.g. shareholders of the MNOs). By looking at the market impact post transactions, it follows that remedies that tend to cause most harm to investors were in relation to asset divestitures (spectrum and/or sites) because usually those divestments facilitated the entry of a new operator to the market.

The best example is the Italian case, where all operators lost market share to the new entrant – with Wind-Tre losing ~1.5% market share between 2016 and 2017. On the other hand, remedies that seem to have least impact on investors are those related to the offering of wholesale capacity to MVNOs; although in Germany that helped strengthen an existing MVNO. Drillisch has added ~3million subscribers since 2014, not counting the ~4m subscribers inorganically gained as a result of being acquired by United Internet and having its operations merged with 1&1 in 2017.


Marc Eschenburg
Marc EschenburgPartner
Graham Johnson
Graham JohnsonPartner