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Orange and Sunrise are banned from hooking up

The mobile merger has received the thumbs down Reuters

Switzerland’s competition watchdog has blocked the planned merger of telecommunications companies Orange and Sunrise.

The decision was described as a “sensational victory” for consumers by the secretary general of the consumer federation in western Switzerland, Mathieu Fleury.

The Competition Commission argued that the company resulting from the deal would have had a dominant position in the mobile telephone market alongside rival Swisscom.

In a statement, the commission said a thorough examination had shown that the two players would have been in a position to bar any effective competition from others.

As a result, the new company and Swisscom would not have been real competitors.

Fleury expressed satisfaction that there had been real surveillance of competition in Switzerland.

If the merger had gone ahead, there would have been only two market players and they would have had every interest in keeping high prices, he commented.

The commission said its investigation had shown that synergies created by the merger would not have promoted competition and provided advantage to consumers.

It added that with three operators on the Swiss mobile market, a “certain dynamism” was maintained and there was room for innovation.

No change

In its analysis, the commission said its decision would not change the current market situation. Swisscom’s position would not be strengthened as a result, it said.

It pointed out that Sunrise and Orange were already established players, in particular Sunrise which was “very active” and a provided a “certain competition” for Swisscom.

The commission added it did not expect Sunrise or Orange to disappear from the market in view of the investments they had made and the customer base built up.

The parent companies of Orange and Sunrise, France Telecom and TDC, say they are “disappointed and surprised” by the decision.

A joint statement said they “strongly believed” there would have been benefits to Swiss consumers.

Dominant position maintained?

Without this merger, Swisscom’s dominant position in the Swiss telecommunications market would be maintained.

The statement added that the combined entity would have been in a position to make significant investments in its networks and “enhance customer experience”.

Identified synergies of such a combination would have enabled the new company to offer more attractive prices and innovative products and services, as well as an enhanced access to a worldwide network, it added.

France Telecom and TDC have said they will now assess the options available to them.

The commission says that they have 30 days to appeal against its decision at the Federal Administrative Court in Bellinzona.

Surprise, surprise

Professor Stéphane Garelli, an authority on world competitiveness at the IMD business school in Lausanne, also expressed surprise at the decision. He told there were other instances where there were only two large companies in an industry sector, such as food distribution.

“I am not quite convinced that this was a threat to the consumer to have those two dominant players. The name of the game is not dominance; it’s abuse of dominant position.

“As a consumer as long as I have a good service and free competition is respected, the fact that I have two, three or four players at the top doesn’t bother me,” he said.

Another person taken aback was telecoms expert Professor Matthias Finger at the Federal Institute of Technology in Lausanne.

“I didn’t expect that. I thought the commission wouldn’t have any choice other than to approve the merger because any alternative would probably be worse.”

“We will get even less investments by Sunrise and Orange [in Switzerland]. Sunrise is even less attractive to be taken over by somebody else and I think in the long run it will cement the Swisscom monopoly.

Robert Brookes,

Swisscom is Switzerland’s leading telecoms provider with 5.6 million mobile customers and around 1.8 million broadband connections.

Orange Switzerland made its market appearance in June 1999. It had a turnover of SFr1.3 billion ($1.22 billion) in 2009, down by 1.1% compared with the previous year.

Sunrise first appeared on the Swiss market under the name of Newtelco in 1996. Its turnover in 2009 was SFr2 billion, up by 7.8% on the previous year.

Under the plans, Sunrise would have been integrated into the France Telecom group and then merged with the French Telecom subsidiary Orange.

France Telecom would have 75% of the shares in the new entity and Sunrise parent company TDC 25%.

France Telecom would have paid €1.5 billion (SFr2.15 billion) for its majority stake.

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