From Paul Selva Raj

It has been reported that Celcom Axiata Bhd is merging with Digi.Com Bhd to create the biggest mobile service provider in Malaysia. The proposed merger would result in the emergence of Asean’s largest telecommunications company with an anticipated revenue of RM50 billion with a net profit of RM4 billion.

This merger will result in market domination and reduce competition in the telecommunications sector. According to experts, with the merger, Celcom and Digi would have a combined share of 67% of mobile subscribers and 58% of the revenue. With the merger, there would only be two competing corporations in the telecommunications sector: the merged company and Maxis. This clearly indicates a high level of concentration in the telecommunications sector.

With reduced competition in the telecommunications sector, would this result in higher prices and lower quality for consumers?

In a similar incident (though not a full merger), Malaysian Airline System (now Malaysia Airlines Bhd) and AirAsia signed an agreement to collaborate instead of competing on routes. With reduced competition, consumers ended up paying higher prices and had less choices in choosing their airlines. This was the clear result of market sharing which had a disastrous impact on consumer welfare and well-being.

The Federation of Malaysian Consumers Associations (Fomca) filed a complaint with the Malaysia Competition Commission (MyCC) to investigate this collaboration between MAS and AirAsia and its impact on consumer welfare. After investigations, both airlines were fined RM10 million as their partnership went against competition laws. The Competition Act 2010 aims to “promote economic development by promoting and protecting the process of competition, thereby protecting the interests of consumers”. Clearly their collaboration brought suffering to the economic interests of consumers.

Fomca calls on the authorities to investigate this merger and ascertain the impact of the reduction of competition in the telecommunications sector on the welfare of consumers.

MyCC does not have a mandate on mergers. The minister concerned had announced that the ministry was seeking to amend the competition laws to give power to MyCC to control mergers and acquisitions of companies that lead to the creation of monopolistic entities in the country. With the amendments, any merger or acquisition of companies will require the prior approval of MyCC to prevent market concentration that could jeopardise the market and cause economic suffering to ordinary consumers.

Fomca fully supports MyCC in amending the competition law to include control over mergers and acquisitions.

The merger of Celcom and DiGi would be under the regulatory supervision of the Malaysian Communications and Multimedia Commission (MCMC) which has reported that it has the tools in place to “prevent monopolies”. Fomca calls on the MCMC to ensure that a thorough investigation is undertaken and consumers are protected from any monopolistic practices. Beyond the tools, MCMC should have the will to protect consumers from unfair market domination.

Paul Selva Raj is the secretary-general of Fomca.

The views expressed are those of the writer and do not necessarily reflect those of FMT.