The Malaysian Communications and Multimedia Commission (MCMC) said yesterday it had no objections to the proposed merger which could potentially result in the formation of the country’s largest mobile service operator, with Digi and Celcom offering a set of undertakings to allay the regulator’s concerns about competition.
Key among them is the cumulative divestment of 70 MHz of spectrum across 1800 MHz, 2100 MHz, and 2600 MHz to MCMC – one band to be returned within two years and two bands to be returned in three years.
“Some clarification would be helpful as to the reason behind certain bands having to be divested in three years, and not two.
“The primary concern would relate to whether the merged entity would be able to install itself as an unassailable dominant player during this time period,” said Shanthi Kandiah, whose practice areas include media and telecommunications regulatory.
She said that while there is precedent in other countries for bands to be divested in three years, divestments have also been required within shorter time frames.
Shanthi noted that MCMC has had the difficult task of looking “into the future” to predict if the merger will substantially lessen competition.
If the merger goes through, the merged company (MergeCo) will have a combined estimated market share of slightly over 50%, almost double that of the next biggest player, Maxis.
“The question, therefore, is whether in three years, it could make use of synergies arising from their combined spectrum to have network advantage, significant pricing and service advantage until others may not be able to compete with it,” she said.
“What you want to see in the country is a level playing field allowing for active competition in the market.”
While she described the undertaking for a functional separation of the mobile virtual network operator (MVNO) wholesale business from the retail business as an “interesting remedy”, she said she was uncertain how this would incentivise MergeCo to compete head-to-head with MVNOs as both units would report to the same CEO.
As part of its obligations in the undertakings, MergeCo will have to establish a separate independent MVNO wholesale business unit, ensuring separation from MergeCo’s retail mobile business, within six months after the completion of the merger.
MCMC defines MVNOs as resellers who do not own any wireless network infrastructure. Instead, they purchase wireless communications services at wholesale rates from mobile network operators (MNOs) and resell subscriptions to consumers through their own branding and other value-added services.
MergeCo also has to ensure fair pricing, the introduction of price capping, the removal or waiver of any contractual lock-in agreements, and the implementation of a fair usage policy to ensure any excessive usage by MVNOs is charged fairly.
This has to be done within three years after the completion of the merger.