Concessions on 5G-ready spectrum would probably be the bare minimum requirement to the transaction being approved
A deal with potential harmful effects: Portugal’s regulator ANACOM has shared with the country’s competition authority, the Autoridade da Concorrência (AdC), its opinion on the proposed acquisition by Vodafone of Cabonitel, the parent company of cableco Nowo. An agreement for the transaction was announced in October 2022, which would see Vodafone’s position in the market bolstered by the absorption of Portugal’s fourth largest converged operator. Acquiring Nowo, which currently has around 140,000 pay TV and broadband accounts, would expand Vodafone‘s network footprint and subscriber base, while reducing the number of fixed operators from four to three. The deal would not lower the number of mobile network operators (Nowo has 250,000 mobile subscribers via a wholesale access agreement with MEO), but it would give Vodafone the second largest share of mobile broadband users, narrowly ahead of NOS. The parties expect the merger to close in H1 2023; however, after a detailed analysis, ANACOM considers that the transaction in its current form could have harmful effects.
Possible impacts on competition and prices: In particular, ANACOM believes that the following effects could arise from the proposed merger:
Price increases by Vodafone and Nowo as a result of a decrease in competitive pressure;
Increased concentration in some sub-national geographic markets and at the national level, although not to an extent that would create a dominant position;
A reduction in competition in the fixed and mobile retail markets, including less tariff differentiation and switching;
A lower likelihood of potential competition in future, which could arise if Nowo was to remain an autonomous entity;
Ineffectiveness of ANACOM’s measures to promote competition in the 2021 multi-band spectrum auction, e.g. caps and network rollout obligations; and
Foreclosure of factors of production or customers, thereby limiting the emergence and/or growth of competitors.
Vodafone may be forced into spectrum concessions: In light of these concerns, ANACOM considers that the AdC should carry out an in-depth review of the proposed merger and that any decision to approve the deal must be subject to conditions. Such commitments from the parties should, at the very least, include the return of spectrum assigned to Nowo that Vodafone could not bid for in the 2021 auction (i.e. spectrum reserved in the 1800MHz band) and additional obligations on Vodafone that it would have been bound to if it had acquired 100MHz of spectrum in the 3.6GHz band in that auction. ANACOM is eager to ensure an efficient use of spectrum and that licences set aside for new entrants will be used by them. While the regulator would need to consider how to reassign the returned spectrum, a potential candidate could be Digi, which also acquired new entrant spectrum in 2021 and began its 5G rollout in June 2022.
