The European Commission has given unconditional approval last Friday to the proposed acquisition of Alcatel-Lucent by Nokia, under the EU Merger Regulation. The 15.6 billion-euro merger with the French-American global telecommunications equipment company was announced by Nokia around 1 pm, last Friday, and later on by the European Commission through an official press release.
No competition concerns
The Nokia-Alcatel-Lucent case is quite an interesting one indeed, as we got used in past to see a more “resolute” approach by the EU’s watchdog to prevent the risks of unfair competition in the European market. Google, for instance, is just one of the famous EU-antitrust cases, but for many reasons, this time nothing to be worthy of noting happened. With its go-ahead, the European Commission formally said that there was enough difference between the two firms to not raise major competition concerns, despite the combined market shares around or above 30% in some sectors of radio access networks and core networks. So, why is this case so different?
“Not close competitors”
First of all, the European Commission officially concluded that “the transaction would not raise competition concerns”, in particular “because the parties are not close competitors. The European Commission declared indeed that there was no real risk also because of market share differences between the two. “Nokia has a strong presence in the European Economic Area, where Alcatel-Lucent is a small player”, the European Commission said, “and conversely Alcatel-Lucent has a strong presence in North America, where Nokia’s activities are rather limited”.
The European Commission began investigating when the transaction was first announced, on 19 June 2015, and it was registered under the case number M.7632. After a few months, the Commission found, in a few words, that the overlaps between the two companies’ activities are effectively limited, despite the enormous power Nokia would eventually gain through this merge. Indeed as of Saturday morning, Nokia’s biggest acquisition so far would result in a supplier that surpasses Ericsson and Huawei in wireless-infrastructure revenue anyway, as specified by many business media outlets like Bloomberg. The Commission specified that it doesn’t see any reason why the merger should make it harder for smaller players to enter the market though.
A number of active competitors around
Moreover, the Commission saw that the transaction to create the biggest maker of equipment for mobile-phone networks won’t prevent anyway fair competition in the bloc since “a number of strong global competitors will remain active after the transaction”. The main players that would compete against the combined firm in the European region are Ericsson and Huawei, the Commission observed, with Samsung and ZTE also occupying a small share of the market.
The Commission sees Samsung in particular as a player on the rise. “Samsung is expected to play a more significant role in the near future, in relation to the newest generation mobile telecommunications equipment (so-called 4G, currently being deployed, and 5G),” the Commission said in the press release.
“Finally, the Commission’s investigation did not find that the transaction would make it harder for new or small players to enter and expand in the market”
Next stop China
Last week Nokia confirmed via official press release that the merger has also received antitrust clearance by antitrust authorities in Albania, Canada, Colombia and Russia, following earlier approval in Brazil and Serbia. US regulators have already approved the deal in June. The deal will also have to go through an approval process in China, the asian market that this home of 1.3 billion mobile subscribers, Nokia’s biggest obstacle now. The company had indeed faced an investigation by Chinese authorities during the acquisition of its handset business by Microsoft.
Large market shares
All in all, this deal, which remains to be approved by Nokia’s shareholders as specified by the company, represents a milestone for Nokia’s future. The Finnish company, once probably the biggest player in the mobile phone and telecommunications industry could eventually gain a 35 percent market share in the telecoms equipment industry through Alcatel-Lucent acquisition, replacing China’s Huawei as the world’s second largest equipment maker, just behind Ericsson.
The case could also represent a major landmark in EU’s antitrust history and also a strong message that the Commission is perhaps trying to send to the world, after a few significant antitrust cases that have recently hit large firms in the 28-nation bloc.