EU's Vestager says in-market mergers are bad news

Speaking at the Merger Regulation 20th Anniversary Conference in Brussels on Thursday, the European Union's competition commissioner made it very clear that not only does she believe that consolidation is often detrimental to the individual countries in question, but also that it runs counter to Commission's vision for a single pan-European market.

"Some argue that telecom companies in the EU should be allowed to merge within national markets to boost investment, even at the cost of higher prices, less choice or lower quality for consumers," Vestager said in an address at the conference, a transcript of which was published by the European Commission. "I don't agree: no evidence suggests that more concentrated national markets lead to better outcomes," she said.

"And certainly, consolidation at the national level would not lead to the creation of pan-European players," Vestager continued. "To the contrary, it would lead to less competitive national markets and to a more fragmented Single Market."

The commissioner's comments will surprise no one. The recently-concluded merger of Orange and MasMovil in Spain to create the now imaginatively named MasOrange, served as a test case for the Commission's current stance on in-market M&A and the extent of the remedies required clearly indicated that reducing the number of facilities-based players in a country is still not a palatable option in Brussels; Digi Communications has been thrust forward as a strengthened fourth player in Spain.

The European Commission's internal market commissioner Thierry Breton – also a champion of single European market concept – has made much of the fact that the body is not wedded to the idea of a specific number of operators per country. But while there may well be no magic number, as Breton suggested, it has become obvious the Commission will not back a reduction in the number of players. And Vestager's latest comments only serve to reinforce that.

The fact that she said it out loud is the biggest news here; we're used to carefully-worded statements about competition that leave us guessing.

The event at which she spoke was set up to mark the 20th anniversary of the 2004 Merger Regulation that still governs M&A in the European Union.

"The Merger Regulation has stood tall for all this time, and like every tall tree it caught its fair share of wind," Vestager stated, before painting a picture of effective merger control that acts as a stable and predictable framework that allows companies to build scale with very little red tape involved.

It's a picture that may well apply in many European industries, but does not seem to be a very accurate portrayal of the telecoms industry, which has been clamouring for change for many, if not all, of the past 20 years. That's probably why the commissioner felt she needed to single out the telecoms space for a special mention.

It's difficult to see the logic behind the idea that in-market consolidation somehow runs counter to the concept of a strong, single European telecoms market that could better compete on the global stage. But that's what the outgoing Commission believes.

And as such, the only thing the industry can predict when it comes to M&A is that it will involve a long drawn out regulatory process, doubtless coupled with stringent competition remedies and the sale of assets to new players. For now, at least. European elections will take place later this year. If we're lucky, the next commission will not leave it until just weeks before the end of its term in office to tell us what it really thinks about telecoms M&A.