Research Notes

Top 10 lessons from 4 to 3 mobile mergers around the world. New Report from Strand Consult

Consolidation is a key topic in the mobile industry. With successive levels of technology, players enter, exit, and evolve in the market. Strand Consult has studied this process for some 20 years. Its new report Understanding 4 to 3 mobile mergersdescribes this phenomenon and explores why some 4 to 3 mergers succeed while others fail. Together with leading telecom and competition experts, Strand Consult has collected, analyzed, and distilled this knowledge into practical and actionable steps for operators.  This includes the relevant legal, regulatory, historical, and technological aspects of different countries and markets. The report is based upon the review of hundreds of academic articles and empirical assessments of mobile mergers, dozens of case studies of 4 to 3 transactions from around the world, and 150 legal, antitrust, and regulatory proceedings. Strand Consult offers the top 10 lessons about 4 to 3 mobile mergers to help operators get smarter about a complex topic.

Here are Strand Consult’s top 10 lessons from 4 to 3 mobile mergers across the world.

  • Lesson 1: Mergers are common in mature markets.
  • Lesson 2: Consolidated markets tend to have higher investment per capita and more advanced networks.
  • Lesson 3: The notions of “magic number” of firms in the market reflects the historical competition law approach for other industries, not mobile networks, and it is based on the Structure-Conduct-Performance paradigm of industrial organizations. While antitrust analysis has modernized somewhat, it still struggles to incorporate to account for the long-term impacts of investment and innovation in networks.
  • Lesson 4: The academic literature on 4 to 3 mobile mergers is inconclusive about the effects of consolidation on price and competition.
  • Lesson 5: Remedies rarely work as antitrust authorities predict; in many cases they are harmful to competition and consumers.
  • Lesson 6: Most mobile merger analyses focus on wholesale and retail competition and prevailing technology. However antitrust authorities struggle to incorporate non-linear factors such as evolving technology and network quality which can change predictions and assessments.
  • Lesson 7:  Most antitrust analysis is based on “sticker price.” This static analysis does not incorporate the reality that mobile services are purchased in bundles in which sticker prices have little meaning.
  • Lesson 8: Operators should guard against overstating the case for their merger. They risk regulators applying more harmful remedies.
  • Lesson 9: Merger analysis in other industries has incorporated uniform and discriminatory pricing in total and effects to consumer welfare. These techniques have been less used in mobile market analysis and could be helpful to understand mergers in the 5G context.
  • Lesson 10: In some cases, mobile operators have challenged the decisions of antitrust authorities to reject their request to merge. Some operators have succeeded to demonstrate that antitrust authorities have insufficient evidence to support their decisions.  This suggests that the practice of reviewing mergers needs to evolve to incorporate the relevant information across a range of factors, not just static prices and the number of firms in the market.

Simply put, institutional prejudice remains in the antitrust analysis of 4 to 3 mergers, and the practice needs to modernize.

 “Understanding 4 to 3 mobile mergers” is a unique and valuable report for mobile operators

The purpose of the report Understanding 4 to 3 mobile mergers is to help operators save time and money. This report does not eliminate the need to hire lawyers to conduct transactions, but it can help improve strategy and communication with key stakeholders like investors, antitrust authorities, regulators, politicians, the media, employees, suppliers, customers academia, and so on.  Most mobile industry CEOs have never presided over a 4 to 3 mobile merger; this report can fast-track the knowledge.

This comprehensive report provides theoretical, practical, and legal perspectives to put 4 to 3 mobile mergers in context and offers an extensive resource of authoritative information on the topic.  Strand Consult’s goal is to lift the level of merger review with quantitative analysis, improve the credibility and transparency of antitrust decisions, and protect agencies from regulatory capture.

Mobile operators need to be smarter in their consolidation strategies; antitrust authorities need to improve their toolsets and measurement techniques; and policymakers need to modernize the standard of review. This report reveals what needs to be done to consolidate the mobile industry in markets around the world.

To find out more and review the table of contents, contact Strand Consult.