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«RTR-GmbH March 2016 Table of Contents Deutsche Zusammenfassung Executive Summary 1 Introduction 2 Market situation 3 Data and basket calculations 4 ...»

-- [ Page 1 ] --

Ex-post analysis of the

merger between H3G Austria and

Orange Austria

RTR-GmbH

March 2016

Table of Contents

Deutsche Zusammenfassung

Executive Summary

1 Introduction

2 Market situation

3 Data and basket calculations

4 Qualitative comparison of price developments

5 Methodology of the estimation

5.1 The difference-in-differences method (DID)

5.2 The synthetic control group approach

5.3 Basic specification and robustness checks

6 Results of the estimation

7 Conclusion

Annex

A1. Definition of baskets and price calculation

A2. Data description

A3. Robustness checks

References

Ex-post analysis of the merger between H3G Austria and Orange Austria 1 Deutsche Zusammenfassung In diesem Papier wird die Preisentwicklung für mobile Sprach- und Datendienste in Österreich im Zeitraum von 2011 bis 2014 im internationalen Vergleich dargestellt und analysiert. Insbesondere wird mit Hilfe ökonometrischer Methoden geschätzt, ob die Fusion zwischen Hutchison 3G (H3G) und Orange Austria (Orange) Anfang 2013 eine signifikante Auswirkung auf die Preise hatte („Merger-Effekt“), bevor die Auflagen der Europäischen Kommission effektiv wurden. Eine Gruppe von zehn europäischen Vergleichsländern, in denen keine Zusammenschlüsse oder Markteintritte stattgefunden haben, wird herangezogen, um die erwartete Preisentwicklung in Österreich ohne Fusion zu schätzen. Im Folgenden werden die verwendete Methodik näher erläutert und die Ergebnisse der Schätzungen dargestellt.

Methodik zur Berechnung des Merger-Effekts Die Berechnung des Preises erfolgt mit Hilfe eines Nutzungskorbs („Basket“), der den durchschnittlichen Verbrauch von Minuten, SMS und MB von Smartphone-Nutzern abbilden soll. Dies geschieht auch für einen „traditionellen“ Nutzer, der die Hälfte der durchschnittlichen Minuten und SMS des Smartphone-Nutzers, jedoch keine Daten konsumiert.

Mit Hilfe der somit berechneten Preise wird in der Folge der Effekt der Fusion auf die Preise geschätzt. Dazu wird die Differenz der Preise zwischen Österreich und der Kontrollgruppe vor dem Merger mit der Differenz nach dem Merger verglichen (Differenz-in-Differenzenoder DiD-Methode). Ist die Differenz nach dem Merger signifikant verschieden von jener vor dem Merger, so deutet dies auf einen Effekt des Mergers auf die Preise hin. Eine wichtige Voraussetzung dabei ist, dass die Trends der verglichenen Gruppen (d.h. Österreich und der Kontrollgruppe) vor dem Zusammenschluss (statistisch gesehen) parallel sind. Ist dies nicht der Fall, wird die so genannte „Trend-Methode“ angewendet, die in der Schätzung die unterschiedlichen länderspezifischen Preistrends berücksichtigt. Zusätzlich werden der Einfluss von Veränderungen der Mobilterminierungsentgelte und des Bruttoinlandsproduktes berücksichtigt.

Weiters wird die Methode der „synthetischen Kontrollgruppe“ angewandt. In dieser Methode wird auf Basis der vorhandenen Kontrollgruppe ein gewichtetes „fiktives“ Kontrollland erstellt, dessen Preise vor dem Zusammenschluss, sowohl was Trends als auch was Höhe betrifft, am ehesten mit dem Vergleichsland (Österreich) übereinstimmen. Der Preiseffekt des Zusammenschlusses wird dann aus der Differenz der Preise zwischen Österreich und der synthetischen Kontrollgruppe nach dem Zusammenschluss ermittelt.

Während wir mittels der synthetischen Kontrollgruppe den gesamten Zeitraum nach der Fusion betrachten, ermitteln wir für die anderen beiden Methoden einen kurzfristigen (bis ein Jahr nach der Fusion) und langfristigen (im zweiten Jahr nach der Fusion) Effekt.

Ex-post analysis of the merger between H3G Austria and Orange Austria 2 Ergebnisse der Berechnungen Zunächst ist eine Überprüfung der Parallelität der Preistrends Österreichs und der Kontrollgruppe nötig, um festzustellen, ob die Differenz-in-Differenzen-Methode ohne länderspezifische Trends angewandt werden kann. Der Trendtest zeigt, dass die Annahme der Parallelität der Trends vor der Fusion mit dem Preiskorb des traditionellen Nutzers erfüllt ist, beim Smartphone-Nutzer jedoch nicht. Daher ist das Ergebnis ohne Berücksichtigung der Preistrends für den Smartphone-Nutzer möglicherweise ungültig, der Vollständigkeit halber wird es aber dennoch dargestellt. Für den traditionellen Nutzer können alle drei Methoden als gültig angesehen werden.

Die Ergebnisse (siehe Tabelle) legen nahe, dass die Preise langfristig für einen österreichischen Smartphone-Nutzer durch die Fusion zwischen durchschnittlich rund 50 % (synthetische Kontrollgruppe) und 90 % (Trend-Methode) gestiegen sind. Auch kurzfristig war eine Steigerung erkennbar, diese fiel aber mit durchschnittlich rund 24 % geringer aus.

Für traditionelle Nutzer lag die durchschnittliche langfristige Preissteigerung zwischen 22 % und 31 %. Kurzfristig, also im ersten Jahr nach der Fusion, war für den traditionellen Nutzer keine Preissteigerung erkennbar. Die Ergebnisse ändern sich auch dann nicht wesentlich, wenn (entgegen der ökonomischen Theorie) die Kosten aus Frequenzauktionen in den Preisen berücksichtigt werden.

Insgesamt ist daher festzustellen, dass der Zusammenschluss in den ersten beiden Jahren, noch bevor die Verpflichtungen (Eintritte von MVNOs) wirksam wurden, zu deutlichen Preiserhöhungen sowohl für Smartphone-Nutzer als auch für traditionelle Nutzer geführt hat.





Geschätzte Merger-Effekte – Basisspezifikation

–  –  –

Ex-post analysis of the merger between H3G Austria and Orange Austria 3 Executive Summary This paper analyses the price developments of mobile telephony (voice and data) services in Austria in the period from 2011 to 2014 compared to international price trends. Econometric methods are used in order to estimate whether the merger of Hutchison (H3G) and Orange Austria (Orange), which took place at the beginning of 2013, had a significant impact on prices (“merger effect”) before the merger commitments (MVNO entries) became effective.

For this purpose, a reference group of ten European countries, in which no merger or new market entry took place, was used to estimate the hypothetical price developments in Austria without the merger.

Methodology for calculating the merger effect Prices are calculated on the basis of price baskets which reflect the average number of minutes, SMS and MB an average “smartphone user” consumes. We also model a “traditional user” who uses only half of the minutes and SMS the smartphone user does and does not consume any data.

To estimate the effect of the merger on prices, the price differences between Austria and the reference group before the merger is compared to the difference after the merger (differencein-difference or DiD approach). If the differences before and after the merger change significantly, this indicates that the merger had an effect on prices.

An important prerequisite is that the price trends in the compared groups (i.e. Austria and the reference groups) were (statistically) parallel before the merger. If that is not the case, the so-called “trend specification” estimation method is used which takes the different countryspecific price trends into consideration. Additionally, the influence of changes regarding mobile termination rates and the GDP are taken into account.

Furthermore, the “synthetic control group” approach is used. This method creates, on the basis of the available control group countries, a weighted control country. This weighted control country shows approximately equal price trends and levels as the treatment country (Austria) in the period before the merger. The merger effect on prices is then calculated on the basis of the price difference between Austria and the synthetic control group after the merger.

While the synthetic control group approach analyses the entire period after the merger, the other two methods calculate a short-term (until one year after the merger) and a long-term (in the second year after the merger) effect.

Results First, a trend test is conducted to show whether price trends in Austria and in the control group are parallel in order to determine if the difference-in-difference method can be used without considering country-specific trends. The trend test shows that the hypothesis, which assumes that the trends prior to the merger are parallel, is valid for the traditional user, but Ex-post analysis of the merger between H3G Austria and Orange Austria 4 not for the smartphone user. Therefore, if the price trends for the smartphone user are not taken into account, the result of the basic DiD approach might be invalid. However, for the sake of completeness, that result is presented as well. For the traditional user, all three methods can be considered valid.

The results (see table) indicate that prices for an Austrian smartphone user have risen in the long run between around 50% (synthetic control group) and 90% (country-trend DiD method) on average. Short-term increases were also notable but were, with an average of about 24%, smaller. For traditional users, the average long-term price increase is between 22% and 31%. However, there was no short-time increase, i.e. within the first year after the merger, for the traditional user.

These results remain qualitatively the same even if we take into account (against economic theory) the possibility that the costs of the spectrum auction in October 2013 might have led to some price increases.

All in all we conclude that the merger had a significant and strong price increasing effect for smartphone users as well as for traditional users before the merger remedies (MVNO entries) became effective.

Estimated merger effect – basic specification

–  –  –

Ex-post analysis of the merger between H3G Austria and Orange Austria 5 1 Introduction This paper examines the impact of the merger between the mobile network operators Hutchison 3G (H3G) and Orange Austria (Orange) in early 20131 on prices for mobile telephony services in Austria.

For this purpose, an econometric analysis is performed which compares prices in Austria with prices in ten EU countries where no merger or entry took place before and after the merger. We use detailed tariff data and country-specific data on average voice, SMS and data usage to calculate price baskets for smartphone users and traditional users (which do not use data services). With these price baskets we make a Difference-in-Differences analysis to estimate the effect of the merger on prices. The methodology we use was developed in a joint project by RTR, the European Commission (Chief Economist Team of DG Competition) and the Netherlands Authority for Consumers and Markets (ACM).2 With this methodology, we estimate significant price increases in the range of 50-90% for smartphone users and 22-31% for traditional users compared to the control group within the two years after the merger, i.e in the period before the merger commitments (MVNO access) became effective. Further we find that even if the costs of frequencies from the frequency auction in October 2013 were taken into account, prices increased significantly compared to the control group.

The paper is structured as follows: Section 2 briefly explains the situation on the mobile telephony market in Austria before and after the merger and gives some information on the merger proceeding and the commitments. In section 3, we describe the calculation of the price baskets and the data used for the analysis. Section 4 consists of a qualitative analysis of the international price trends on the basis of price data. In section 5, the methodology of the econometric analysis is described and in 6 its results are presented. Section 7 concludes based on the results from the qualitative and the quantitative analyses.

2 Market situation At the time of the merger there were four mobile network operators (MNOs) active on the Austrian market: the Austrian fixed network incumbent A1 Telekom Austria (with its main brands A1 and bob); T-Mobile Austria (with its main brands T-Mobile and tele.ring); Orange Austria (with its brands Orange and Yesss!); and Hutchison 3G Austria (with its brand Drei).3 The merger consisted of the transaction between H3G and Orange and a second transaction in which H3G spun off the Orange sub-brand Yesss! to A1 Telekom Austria. These transactions led to a more symmetric market structure in the Austrian mobile market (see The transaction was authorised by the European Commission on December 12, 2012 subject to commitments (see section 2) and concluded in January 2013.

see Aguzzoni et al (2015) Besides the network operators with their sub-brands there were two independent MVNOs and a number of resellers which, however, did not have significant market shares.

Ex-post analysis of the merger between H3G Austria and Orange Austria 6 Table 1). While A1 Telekom Austria even strengthened its position as market leader due to the purchase of Yesss!, H3G came closer to T-Mobile in terms of subscriber-based market shares.

Table 1: MNO subscriber-based market shares

–  –  –

Both transactions (H3G-Orange and A1 Telekom Austria-Yesss!) were notified to the authorities in May 2012. The Austrian Cartel Court approved the Telekom Austria/Yesss!

transaction on November 26, 2012.4 The transaction between H3G and Orange was authorised by the European Commission on December 12, 2012 subject to commitments.5 The merger was concluded in January 2013.

The commitments offered by the merging party consisted of

(i) a commitment to facilitate MNO market entry by divesting spectrum to a potential new MNO as well as providing national roaming, preferred collocation rights and the possibility to purchase sites to this new entrant;

(ii) a commitment to facilitate MVNO market entry. This commitment package consists of an upfront agreement with one MVNO and a reference offer for up to 16 MVNOs with wholesale access to up to 30% of H3Gs network.6 While the first commitment did not become effective, the second commitment only became effective with significant delay. The MVNO who signed the up-front agreement – UPC – entered the market in December 2014. Significant competitive pressure from MVNOs only developed after the market entry of further MVNOs in the course of 2015.



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