The deal would further cut the market share of independent MVNOs, while strengthening the incumbent’s position in the low-cost segment
ACM concerned by a loss of competition at the lower end of the market
On 14 September 2023, the Authority for Consumers and Markets (ACM) determined that further investigation is needed into the proposed €200m (£173m) acquisition of quad-play provider Youfone by former incumbent KPN. According to KPN, adding Youfone’s distinctive brand and sub-brands, and 540,000 customers to its portfolio would materially strengthen its position in the mobile and fixed broadband markets. However, the ACM considers that the transaction could result in a loss of significant competitive pressure in the budget (or ‘no-frills’) segment of the mobile market. That, in turn, could lead to higher prices or reduced choice for Dutch consumers. Similar deals (e.g. T-Mobile/Simpel in 2020), have seen the total market share of independent mobile virtual network operators (MVNOs) fall considerably over the past decade.
Challenger Youfone exerts pricing pressure of rival operators
Youfone does not have infrastructure of its own and uses KPN’s networks to offer fixed voice and broadband at the retail level, and mobile services downstream via an MVNO agreement. The ACM’s notes that Youfone could also use the networks of Odido (formerly T-Mobile) or VodafoneZiggo, which may boost its bargaining position in negotiations with KPN and enhance its ability to compete on price. As a challenger brand, Youfone currently offers a limited number of highly competitive tariffs, which exerts pricing pressure on other operators. However, with the acquisition, competition in the no-frills segment of the mobile market could deteriorate – particularly as KPN already owns low-cost brand Simyo. The ACM’s follow-up investigation will consider this potential concern further and will also explore whether other providers are able to replace Youfone as a major driver of competition.
Commitments will be needed to secure regulatory approval
The ACM analysis will seek to establish whether sufficient competition would remain directly after the transaction should it go ahead, as well as in future years. The regulator’s position is that competition ensures telecoms services are of high quality and provided at reasonable prices, and promotes innovation. The ACM has since stated that the acquisition may not be completed for the time being, but the merging parties can apply for a ‘permit’ for its approval. The regulator would then have 13 weeks to take a decision, during which time solutions can be proposed to mitigate the risks to competition, for example “hiving off” divisions or subunits of the businesses. If the ACM considers the proposed solutions to be sufficient, the deal will be allowed to go through. If the remedies are not sufficient or if none are offered, it will be blocked.
