Competition authority examining Vodafone acquisition of Nowo in-depth

The Portuguese Competition Authority (AdC) has opened an in-depth investigation into Vodafone’s acquisition of Cabonitel and therefore of telecoms provider Nowo, considering that it cannot exclude that the transaction results in “significant impediments to competition”.

In a statement released on Wednesday, AdC announced that “it has opened an in-depth investigation into the acquisition by Vodafone Portugal, S.A. of sole control over Cabonitel, S.A., in particular, over Nowo Communications”.

According to the AdC, the decision to proceed with an in-depth investigation was based on the fact that the entity “considers that, in view of the elements gathered so far, it cannot be excluded that the referred concentration transaction results in significant impediments to effective competition in the national market or in a substantial part of it, harming consumers”.

Therefore, as a result of the investigative steps taken so far, the Competition Authority “considers that the concentration operation is likely to generate a set of unilateral effects and coordinated effects, with adverse impacts for telecom customers in Portugal”.

With regard to unilateral effects, the AdC believes, at this stage, that the transaction “results in the acquisition of the operator that currently offers comparatively lower prices in a significant set of fixed and mobile telecommunication services (affectation of current competition)”.

In addition, it stated, “it not only results in the elimination of an operator that, despite its size, exerts a not insignificant competitive pressure in the market, but it is expected that such pressure would be reinforced in the future, as a result of the spectrum acquired during the 5G auction of 2021 (potential impact on competition)”.

The Competition Authority also considers that the transaction “is likely to reinforce barriers to entry and expansion in the market, as Vodafone will ‘inherit’ the control over the spectrum reserved for new entrants, such as Nowo, thus eliminating the possibility of use of the same by other operators different from those already present in the market”.

On the other hand, as to coordinated effects, AdC said that “the necessary conditions for an increase in the probability, sustainability and degree of coordination of behaviour by Meo, NOS and Vodafone, resulting in the potential alignment of offers of these operators with adverse impacts for telecoms customers in Portugal, have been met”.

According to the regulator, “the market characteristics create a favourable context for the verification of the said conditions for coordination” and “the elimination of Nowo, as an independent operator, has a potential impact or, at least, reinforces the conditions for the external sustainability of coordination between Meo, NOS and Vodafone”, it explained.

The Competition Authority stressed that this decision does not “constitute a final decision on the procedure”, recalling that “it decides to open an in-depth merger investigation when it considers that additional diligences are necessary”.

Thus, after completion of the in-depth investigation, the AdC may decide “not to oppose the closing of the deal if it concludes that the concentration, as notified or following changes made in the meantime by Vodafone”, i.e. the so-called commitments or remedies, “is not likely to create significant impediments to competition in the market concerned”.

However, the AdC may decide to “prohibit the deal, if it concludes that the concentration is likely to create significant impediments to competition in the relevant market, with prejudice to intermediate and/or end users, who constitute the demand in this market”.

The AdC received, on 7 November 2022, the notification of the purchase by Vodafone Portugal of sole control of Cabonitel, a Portuguese company controlled by Spain’s MásMóvil Ibercom, which owns Nowo, which has a 5G licence.