The European Commission on Tuesday sent a list of concerns to telecoms operators Telenor and TeliaSonera over their plans to merge their mobile operations in Denmark.
The official statement of objections means the companies have failed to satisfy the Commission’s concerns the deal could hurt consumers by reducing choices and potentially lead to higher prices.
Competition Commissioner Margrethe Vestager, who is Danish, announced in April she would investigate the proposed merger. Telenor of Norway and TeliaSonera of Sweden should have two weeks to respond.
“Competition in the Danish mobile market is fierce and will remain so in the future,” the companies said in a statement.
There have been several mergers over the past few years that have reduced a country’s operators to three from four. So far, the Commission has approved them, but subject to tough conditions.
But there are fresh concerns the mergers still led to price increases, prompting regulators and rivals to call on the Commission to block future takeovers.
In Austria, the Commission cleared the acquisition of Orange by Hutchison 3G in 2012, despite objections from local regulators. Austria has since launched a probe into whether prices actually went up.
TeliaSonera and Telenor will argue an equally important measure of healthy competition is the level of investment in network infrastructure, which is a sensitive topic in the European Union.
“Combining Telia and Telenor in Denmark is about creating a company with the scale and the capacity to better invest and compete — both on price, quality and innovation,” the companies said.
The Commission may be open to that argument because of the EU’s slow progress in rolling out 4G mobile phone technology, let alone the next generation 5G.
“Europe must win the 5G race,” said Roberto Viola, deputy director-general of DG CNECT at a conference Tuesday. “In 4G we had a disaster. We woke up late and still we are struggling behind other regions in the world.“
What happens next?
It is likely the companies will negotiate a range of conditions with the Commission to attain a blessing to merge.
In previous cases, this has meant concessions on spectrum and network sharing arrangements with challengers in the market.
But this case is different for a number of reasons.
The companies involved in the proposed merger operate on a single common network. This means that while the number of networks in Denmark would not change, retail competition would be reduced.
Speaking in Paris last week, Vestager herself questioned whether mergers led to better outcomes for consumers.
“There is ample evidence that excessive consolidation may lead not only to less competition and more expensive bills for consumers, but that it also reduces the incentives in national markets to innovate,” she said.
This may mean a high hurdle for the Danish deal as well as another in the U.K. between Three and O2.
“To me, Madame Vestager’s comments signal that the possibility of actually blocking one or more of these proposed mergers may be back on the table,” said David Cantor, an EU telecoms lawyer with Rosenblatt & Co.
Nicholas Hirst contributed to this story.