Italian regulator OKs Vodafone/Fastweb merger

The Autorità per le Garanzie nelle Comunicazioni (AGCOM) has approved the transaction unconditionally, Swisscom announced. The green light is "another important step" on the road to getting the deal over the line, Swisscom said. But while it's hard to argue with that – the telco did need to get AGCOM onside – there is a greater challenge ahead.

Swisscom brokered an €8 billion deal to acquire Vodafone Italia in March, its plan being to merge the business with its own Italian unit, Fastweb.

AGCOM has assessed that plan in its role as Italy's market regulator; specifically, Swisscom noted that it has examined "the effects of the transaction on the competitive and pluralistic structure of the Italian market for audiovisual media services." But all eyes are really on the Italian antitrust authority, which is carrying out an in-depth probe into the deal.

The Autorità Garante della Concorrenza e del Mercato (AGCM) revealed last month that it would move into a Phase II competition investigation, highlighting the fixed broadband market as a key area of focus.

"The Transaction is likely to determine a significant impediment to competition in the market for fixed communication services for residential users, as well as in some specific competitive areas that it appears appropriate to distinguish within it," the AGCM said at the time.

Together Vodafone and Fastweb would claim a retail fixed broadband market share of around 30%, which is still considerably smaller than that of incumbent TIM, but more than double that of third-placed player Wind Tre. The merged entity would be a stronger competitor to TIM, but naturally the loss of a significant operator from the retail side is always going to raise warning flags for regulators. And the AGCM is also looking at the wholesale and business sectors too.

Naturally, Swisscom et al are jumping through all the hoops available to them to win over the AGCM. Earlier this week Reuters reported that Swisscom submitted a new set of potential competition remedies in late October, which included opening up Fastweb's fibre network to allow rivals to provide services to corporate and public administration clients, and a commitment to retain existing wholesale contracts, amongst other things.

Competitors had until 4 November to provide feedback on the remedies, the newswire's sources said. Antitrust officials are now examining all the relevant information.

The AGCM has until mid-December to complete its investigation, which – if the outcome is favourable – fits with Swisscom's timetable of finalising the transaction in the first quarter of next year.

As we have previously noted, despite the competition issues highlighted by the AGCM, Vodafone and Fastweb being rivals in the fixed market, there is no reason to think that the deal will not be approved. Doubtless there will be some conditions attached to mitigate any threat to competition, but it seems likely that the relevant authorities will back the deal.

The fact that AGCOM given the merger the thumbs-up only reinforces that likelihood. As Swisscom said, it is a step in the right direction.