Officer for Competition opens in-depth investigation into proposed Melita-Vodafone merger

The Office for Competition, within the Malta Competition and Consumer Affairs Authority, has opened an in-depth investigation to assess whether the proposed concentration of Apax Partners Midmarket SAS (Paris, France) and Vodafone Malta Limited is in line with the Control of Concentrations Regulations.

The transaction would result in the integration of Vodafone Malta in MelitaLink Limited, the current holding company of Melita Limited, a telecommunications company active in Malta, which is currently controlled by Apax.

“The Office has serious concerns that the transaction could prima facie limit competition, mainly in the mobile telephony market and possibly in the fixed markets, without providing sufficient pro-competitive effects. This is primarily based on the potential harm to competition and consumer welfare arising from the fact that the concentration would significantly curtail the possibility for three players to operate in the relevant markets, as it would instead create a dominant player within a duopolistic setup. This assessment reflects serious concerns arising from the proposed concentration with regards to the horizontal effects of the transaction in the mobile-only market, and the potential for coordinated and foreclosure effects in the mobile-only and multi-play markets.

The Office will therefore assess the proposed transaction in-depth by opening a Phase II investigation. This will deeply investigate issues raised in this assessment, as well as others which may arise in the course of the Phase II process.”

The transaction was filed on 31 May 2017 and accepted as a complete notification on 2 June 2017. In the Phase II process, the Office has to issue a decision within four months. The opening of the indepth investigation is without prejudice to the final decision of the case.

GO statement

GO p.l.c. welcomed the decision. “The Office initiates such an investigation when it considers that the proposed market concentration raises serious concerns on significant impediment to effective competition in the market. Typically during Phase 2 investigations the Office will conduct detailed research and analysis on issues such as the possible increase in prices that the acquisition may cause and possible anti-competitive behaviour that may result from the creation or strengthening of dominance in the market.”

A GO spokesperson noted: “The proposed takeover of Vodafone, in a critical sector such as telecommunications, is unprecedented as it reduces the number of major competitors in the market down to two. This would be, by far, the largest market concentration in Malta’s history and, unless it is properly implemented and adequate remedies and safeguards are provided for, it could have very far reaching and long term implications and negative outcomes for consumers and ultimately for the whole country. It is hardly surprising therefore that the case is being followed closely in Malta and beyond, and that objections have been raised by consumers groups.

“The fact that the Office has, correctly in our view, decided to go into a much more thorough Phase 2 investigation should mean that the proposed acquisition will be given proper evaluation and that adequate safeguards may be provided to ensure the sector remains viable and that consumers continue to enjoy real choice. Naturally, as an interested third party, GO will continue to collaborate fully with the Office for Competition and present detailed technical economic assessments on the matter.

As we have repeatedly stated, GO does not fear competition – indeed we welcome it because healthy market competition benefits consumers and drives innovation. However unless there is a proper level playing field one might end up in a scenario where ultimately competition and the consumer lose out. We augur that this can be averted.’’

Vodafone statement

Vodafone Malta said it was expected that such a transaction would require a more in-depth analysis and move to a Phase 2 investigation. Vodafone Malta will continue to assist and cooperate fully with the Office for Competition in this important process.

Vodafone Malta believes that the merger will produce an entity with the necessary scale to be able to compete with GO much more effectively than the two entities can on their own. A merger is the only means by which this can be achieved.

If the merger is approved, Melita’s mobile customers will very quickly experience the much superior Vodafone mobile network. Vodafone customers on the other hand will be able to access Melita’s internet and television bundles, and will be able to use Melita’s extensive public WIFI network. There is a very real demand for convergence from both companies and consumers in Malta and the combined company will have a strong quad play bundle (mobile, fixed internet, fixed telephony and TV service) that will rival GO’s.

The combined entity will also be much better placed to bring about continued improvements in technology in fixed line internet and in mobile, more quickly than either of the two entities could achieve on their own.