Hutchison VimpelCom Italian JV approved as Europe sets precedent

The merger of Hutchison and VimpelCom’s Italian assets has been approved by the European Commission, setting a new precedent for market consolidation.

Wind and Three will become one soon enough, following today’s ruling from Commission. It means that this the first deal of note to be approved by Europe which will, temporarily at least, see the number of MNOs in a market reduce from four to three. The Commission, suitably, noted its concerns and gave its approval to the deal on the condition that the proposed divestment of assets to create a fourth mobile operator goes ahead.

The same concerns were the sole purpose behind the rejection of Hutchison’s proposed acquisition of O2 in the UK earlier this year. It looks like Hutch learned its lesson from the UK debacle, in which its CEO threatened legal action, and a proposal for the sale of assets to Iliad was submitted to the Commission for its approval. This paved the way for the deal’s approval, which the Commission readily acknowledged in its announcement.

“The parties have offered remedies that fully address the Commission’s concerns, namely the divestment of sufficient assets to allow a new entrant to enter the Italian market as a fourth mobile network operator,” the regulator said. “This will replace the competition lost and ensure that Italian mobile customers are not harmed as a result of the transaction.”

“We can approve the deal because Hutchison and VimpelCom have offered a strong remedy that enables a new mobile network operator, Iliad, to enter the Italian market,” said Competition Commissioner Margrethe Vestager. “This case shows that telecom companies in Europe can grow by consolidation within the same country, provided effective competition is preserved. It also shows they can grow by cross-border expansion, such as Iliad in this case.”

It’s not uncommon for large organisations to altruistically cite consumer protection as the motive for their actions, but in this case it looks like the European Commission really means it. The same reasoning was behind the aforementioned UK case, and has been the precedent given across a number of other countries in Europe. With this ruling though, the legwork put in to secure a replacement new market entrant seems to have paid off, and looks to have set a new precedent.

“Today is a good day for businesses and consumers across Italy,” said Hutchison CK Co-MD Canning Fok. “This joint venture will unlock major investment in Italy’s digital infrastructure, creating a telecoms company with the scale and strength to offer world‐leading telecoms services with greater reliability, coverage and speed. The joint venture will ensure Europe’s fourth largest telecoms market remains a leading player in the global digital economy.”

Whether today’s ruling would encourage Hutch to revisit its UK ambitions remains to be seen.