Snakes vs. Telecom Consolidation – What’s the Bigger Concern?

Our favourite Danish telecom pundit, John Strand, recently wrote about a June event hosted by the GSMA and Teleindustrien. Strand used his note to compare telecoms vs. coffee spending by Danish ministerial employees. As much as this might seem like solid prep for a particularly tough pub quiz, there was a deeper reason: the keynote speaker - Minister for Digitalisation Caroline Stage Olsen - used her time on stage to express concerns over the impact of telecoms consolidation and John has some clear (fact-based) views on what that could mean in Denmark. 

Everyone, of course, is entitled to their own set of FUD (fear, uncertainty, doubt) generators. Personally, I’m afraid of snakes and doubt that they’re actually more scared of me than I am of them…no matter what my friends and family tell me. Railing against telecoms consolidation circa 2025, however, seems increasingly silly and blinkered. 

Just as sure as I am that snakes have fangs and some are venomous, there are a few facts about telecoms consolidation we should all acknowledge. 

• Econ 101 vs. Econ 201. Most of us will recall the lessons of introductory-level economics courses on the topic of competition. Competitive pressures result in lower prices for consumers and drive both innovation and investment as companies actively fight for customers. Then you get to next year’s class and learn the world isn’t so simple. Fewer companies competing for a given market increases the average scale for each. With more scale, there is less duplication of fixed costs and lower costs per user. Lower consumer prices can result. Return on investment increases, improving the business case for investment and innovation; all to the benefit of consumers.  Beyond abstract, academic discussions, this all applies to telecoms operators.
• The Verdict is In. I can think of nothing nicer after a Danish pub quiz involving coffee pricing than a friendly debate over the impacts of telecoms consolidation. Given a very clear evidence base for the effects of consolidation in the mobile sector, however, it’s likely to be a short debate. Putting aside the high-profile Draghi Report and the arguments it makes for consolidation in Europe, our own data and analysis looking at Europe over the last decade made a few things clear. Markets with greater operator scale have seen: larger investments per operator; comparable levels of total investment per country – despite having fewer networks; better network quality experienced by consumers and businesses; faster rollout of the latest generations of mobile networks like 5G; similar consumer prices once differences in usage are factored in.
• It’s Upon Us – Like it or Not. Whatever your views on consolidation in the mobile sector there’s one thing we can all agree on. It’s happening and potentially accelerating. Think big markets, like the US. Think small markets, like Singapore.  Think drawn out and contested consolidation, like in the UK. Think markets like Spain where major consolidation last year has driven discussions of further deals. And, to be sure, if the value of concentration further proves itself, these markets won’t be the last. 

If you’re a politician sitting in a small market you know well, you might be entitled to a fear over the effects of telecoms competition. If you’re in a market like Denmark you might be particularly inclined to think that your structure is just what everyone needs; it comes out near the top of our Mobile Connectivity Index and 5G Connectivity Index driven by strong demand and supply side drivers, though the evidence indicates it might do even better with greater operator scale.

Ultimately, however, if you care about consumer outcomes and take a less myopic view of the topic, you cannot ignore the facts which should be a foundation for evidence-based policymaking. You can, however, remain afraid of snakes.