• Field
  • Date

Price increases caused by mergers were followed by price decreases due to entry of new mobile operators

Today, the Austrian Federal Competition Authority BWB and the Austrian Regulatory Authority for Broadcasting and Telecommunications RTR published two reports assessing the effects of the merger between Hutchison 3G Austria and Orange Austria. The deal was approved – subject to commitments – by the European Commission in December 2012. In a related transaction, Hutchison 3G Austria sold on the Orange brand "Yesss!" to the incumbent operator A1 Telekom Austria. This merger was cleared by the Austrian Cartel Court without remedies in November 2012. BWB objected to the clearance of both mergers, as negative effects on competition were expected. RTR was also very critical towards these deals.

Both studies analyse the effects of these transactions in the years 2013 and 2014. This is the period before several mobile virtual network operators (MVNOs) entered the market. While the study of BWB deals with the effects on existing customers, the analysis of RTR focuses on prices for new customers. Both studies compare actual price developments to econometric predictions of price developments without the merger.

Both reports conclude that the merger led to significant price increases in 2013 and 2014. The BWB study reports average price increases for existing customers in the range of 14−20% with average increases of 20−30% in the pre-paid segment and 13−17% in the post-paid segment. The RTR study estimates price increases of 50−90% for an average smartphone user and 22−31% for an average traditional user (who does not use data services).

In the course of 2015, several new MVNOs entered the market. Entrants benefited from an increased price awareness of consumers that is also a result of the wide-ranging activities of BWB, RTR and the Austrian Chamber of Labour (AK). In addition, RTR took measures to facilitate switching between operators (e.g. decreased the costs of number portability).

Due to the lower-priced offers of the new operators and the reactions of the established operators, prices are decreasing again. This is also reflected in the RTR mobile price index. Competition therefore has intensified.

Nevertheless it can be observed that some retail prices are still above the level before the merger. Furthermore, it is uncertain how sustainable competition from MVNOs will be in the long run. The authorities will therefore continue to monitor the market for mobile telecommunication services.

We would like to keep you up to date

I expressly consent to the processing of my e-mail address provided here in accordance with the provisions on data protection. I can revoke this consent at any time.