3 Legs Good – 2 Legs Better?

Author: Jean Pierre Scerri

The European Commission’s evolving approach to consolidation in mobile markets

The recently announced agreement under which Melita is to take over Epic has brought the question of mobile market consolidation firmly onto the Maltese agenda. Readers of George Orwell will recall the sheep of Animal Farm, who first bleated “four legs good, two legs bad” and later, when circumstances changed, “four legs good, two legs better”. The history of EU merger control in the mobile sector invites a similar observation. For over a decade, Brussels treated a reduction in the number of mobile network operators (‘MNOs’) with considerable suspicion, and many perceived a market of three operators as the floor below which the European Commission would not go. More recently, the tone of the debate has shifted towards scale, investment and European competitiveness.

This article does not take a position on whether a market served by two, three or four networks produces better outcomes for consumers, nor does it comment on the proposed Maltese transaction, which the competent authority will assess on its own facts. Its purpose is narrower: to trace, through the decisional practice of the Commission and the case law of the EU Courts, how the Commission’s thinking on mobile consolidation has developed.

The early years: remedying the loss of a maverick

The first significant test came in T-Mobile Austria/tele.ring (Case COMP/M.3916, 26 April 2006) after an in-depth investigation and a Statement of Objections, on the basis of commitments offered by the acquirer. At the time, four operators ran nationwide 2G networks in Austria, alongside H3G, which had entered in 2003 with a pure 3G network. The case was important because it was one of the first applications of the “significant impediment to effective competition” (SIEC) test introduced by the 2004 Merger Regulation to a transaction in which the merged entity would not become market leader. The Commission’s concern centred on the loss of tele.ring as a disruptive, “maverick” competitor, and the remedies were designed to replace that competitive force rather than to preserve a particular number of networks.

The following year, the Commission unconditionally cleared the merger of T-Mobile and Orange in the Netherlands, a four-to-three transaction. Several years later, economists from the Commission and the Dutch and Austrian competition authorities looked back at how prices had moved after these mergers. They compared prices in each country with prices in similar countries where no merger had taken place. In the Netherlands, prices rose by 10% to 15% more than in those comparison countries after the T-Mobile/Orange merger, although an earlier Dutch merger may have contributed. In Austria, by contrast, they found no evidence that the five-to-four T-Mobile/tele.ring merger, which the Commission had cleared subject to conditions, led to higher prices.

2012–2016: four-to-three permitted, but at a price

Between 2012 and 2016, a wave of four-to-three mergers reached the Commission. In Hutchison 3G Austria/Orange Austria (Case M.6497, 12 December 2012), clearance was made conditional on a package designed both to facilitate the entry of a new MNO, through the divestiture of spectrum, national roaming and site access, and to facilitate the entry of mobile virtual network operators (MVNOs), through an upfront agreement with one MVNO and a reference offer granting up to sixteen MVNOs access to as much as 30% of the merged network. BEREC later found that structural remedies to attract a new MNO were not effective in any of the merger cases it reviewed, including Austria

The Commission applied similar logic in Hutchison 3G UK/Telefónica Ireland (Case M.6992, 28 May 2014) and, most prominently, in Telefónica Deutschland/E-Plus (Case M.7018, 2 July 2014). In the German case, Telefónica committed to sell up to 30% of the merged network’s capacity to up to three MVNOs at fixed prices and to offer spectrum and other assets to a new entrant. The Commission subsequently showed its willingness to police such commitments: in 2019 it sent Telefónica a Statement of Objections alleging breach of the E-Plus commitments, the first time it had done so for merger remedies.

The message from this period was that the Commission would not prohibit a reduction from four to three networks as a matter of principle but would accept it only with remedies intended to recreate, through new or strengthened entrants, the competitive pressure lost through the merger.

The high-water mark: Denmark, the United Kingdom and Italy

The Commission’s stance hardened noticeably in 2015 and 2016. TeliaSonera and Telenor abandoned their proposed combination in Denmark in 2015. On 11 May 2016, the Commission prohibited the acquisition of Telefónica UK (O2) by Hutchison 3G UK (Three) (Case M.7612). It found that the transaction would have removed an important competitor, leaving the merged entity, with a combined network-level subscriber share the Commission put at 40-50%, facing only EE and Vodafone, and that the reduction from four to three operators would probably have led to higher prices, less choice, reduced quality and hindered network investment, as well as fewer hosts for MVNOs.

A few months later, in Hutchison 3G Italy/Wind/JV (Case M.7758, 1 September 2016), the Commission cleared the creation of Wind Tre only on condition that spectrum be divested, base stations shared or sold, and national roaming provided to Iliad, enabling a new fourth MNO to enter. In substance, the four-player structure of the Italian market was preserved. Taken together, these cases gave rise to the widespread perception that “four-to-three” had become the practical limit and that “four” was the Commission’s preferred number.

The Courts weigh in: CK Telecoms

The prohibition of the Three/O2 transaction was challenged. By judgment of 28 May 2020 in CK Telecoms UK Investments v Commission (T‑399/16), the General Court annulled the decision. It held that, although the Merger Regulation allows the Commission to prohibit concentrations in oligopolistic markets that give rise to non-coordinated effects even absent dominance, the Commission had not established the alleged impediments to the required standard. The General Court took issue with the Commission’s treatment of Three as an “important competitive force”, its analysis of closeness of competition, its quantitative price-effects analysis and its theory of harm relating to network-sharing arrangements, and it articulated a demanding standard of proof.

On appeal, the Court of Justice (Grand Chamber), in Commission v CK Telecoms UK Investments (C‑376/20 P, 13 July 2023), set aside the General Court’s judgment. The Court of Justice held, among other things, that the General Court had erred in law by failing to carry out an overall assessment of the relevant factors, in light of the results of its own review, to determine whether the Commission had demonstrated a significant impediment to effective competition, and it addressed the standard of proof and the concepts of “important competitive force” and “close competitors”. The judgment restored a considerable degree of flexibility to the Commission in assessing oligopolistic mergers. The key point for present purposes is that it confirms the Commission’s tools for scrutinising consolidation in concentrated mobile markets, without dictating any particular number of operators.

The recent thaw: three-player markets accepted

The decisions following the high-water mark suggest a more permissive climate. In T-Mobile NL/Tele2 NL (Case M.8792, 27 November 2018), the Commission cleared a four-to-three merger in the Netherlands unconditionally under Article 8(1) of the Merger Regulation, after an in-depth investigation, in a market that also featured a converged fixed-mobile operator, VodafoneZiggo. On 20 February 2024, in Orange/MásMóvil/JV (Case M.10896), the Commission declared compatible under Article 8(2) the combination of two of Spain’s four MNOs, after a detailed review of the Spanish market and the growing role of alternative operators.

Alongside individual cases, the policy context has evolved. The Commission has undertaken what it describes as the broadest review of merger policy in two decades. The Commission published draft new Merger Guidelines on 30 April 2026, the public consultation closed on 26 June 2026, and the Commission expects to finalise the review in the fourth quarter of 2026. Among the topics consulted upon was “competitiveness and resilience”, reflecting a debate that gives scale and investment capacity greater weight alongside traditional concerns about market power. The preparatory materials stress that merger control should allow companies to gain scale, innovate and invest, while preventing the accumulation of market power in the hands of a small number of companies.

Two legs?

The absence of precedent

It is against this backdrop that the question of a three-to-two transaction arises. To date, the Commission’s published decisional practice on mobile mergers has concerned transactions reducing the number of networks from five to four or from four to three; we are not aware of a Commission decision authorising a reduction to two MNOs in an EU mobile market. Any such transaction would therefore engage the analytical framework developed in the cases above, including the concepts of important competitive force, closeness of competition and coordinated effects, the role of MVNOs and fixed-mobile convergence, and the evidential standards confirmed in CK Telecoms, as well as whatever emerges from the revised Merger Guidelines.

Non-coordinated (unilateral) effects

The first strand of that framework concerns non-coordinated, or unilateral, effects. The analysis asks whether removing one of the merging parties would relax the competitive constraint on the merged entity enough to allow it to raise prices or reduce quality, regardless of how its remaining rival reacts. In the four-to-three cases, the Commission looked at the overall market structure, the diversion ratios between the merging parties, their margins, their importance in winning new customers, entry barriers, buyer power and whether competitors had an incentive to follow price increases. After CK Telecoms, it is settled that such effects can amount to a significant impediment to effective competition in an oligopolistic market even where no single or collective dominant position is created. In a three-to-two scenario the same questions arise, but the analysis of which other sources of competitive constraint exist takes on greater weight. In the EU cases, MVNOs often featured both in that assessment and in remedies. Where, as in Malta, there is currently no meaningful MVNO presence, that analysis is likely to look at other factors as well: the competitive dynamics between converged fixed-mobile offers, the role of over-the-top communication services, and whether access conditions could make entry by non-network operators realistic in a market of this size. The relative weight of these factors is a question of evidence rather than presumption.

Coordinated effects: the legal test

The second strand concerns coordinated, or collective, effects, which have historically played a smaller role in mobile cases. The Horizontal Merger Guidelines explain that a merger in a concentrated market may make it more likely that the remaining firms can align their behaviour and raise prices without any agreement or concerted practice. Two judgments define how that risk must be proved. Airtours (T‑342/99) sets out three cumulative conditions. First, the market must be transparent enough for each firm to detect whether the others are deviating from the common course. Second, there must be a credible means of punishing deviation, so that coordination is sustainable over time. Third, the reactions of outsiders, such as smaller competitors, potential entrants and customers, must not be able to undermine the expected results of coordination. Impala (C‑413/06 P) then clarified how those conditions are to be applied. They are not a checklist to be ticked off in isolation; an authority must assess them against a specific and plausible theory of how tacit coordination would actually work in the market concerned, including the point on which the firms would coordinate.

Coordinated effects in a three-to-two mobile market

Applied to a reduction from three mobile networks to two, these tests structure the inquiry rather than answer it. On the Airtours transparency condition, published retail tariffs and frequent, repeated interaction between operators may make deviations easy to observe. Increasingly complex and individually negotiated fixed-mobile bundles and business contracts may make them harder to see. On sustainability, two operators facing each other in every segment have many ways to respond to a price cut, but differences in network capacity, spectrum holdings or customer mix may weaken the incentive to follow a common course. On outsiders, the question is whether any competitor outside the coordination, such as an MVNO, a reseller or a potential new network entrant, could realistically defeat a coordinated price rise. Where no such operators are active today, the analysis turns to whether they could emerge, and on what access terms and at what scale. The Impala approach requires an authority to tie these features to a coherent account of what the two operators would coordinate on, whether retail prices, wholesale access terms or the pace of network investment, and why that coordination would be stable. A two-player market is the structure in which tacit coordination is easiest to envisage, but under the case law structure alone does not establish it. Whether the conditions are met is an evidential question for each market.

Efficiencies and remedies

The third strand concerns countervailing factors. Under the Guidelines, efficiencies can be take into account only if they benefit consumers, are specific to the merger and are verifiable. Efficiencies may also reduce the risk of coordinated effects by increasing the merged entity’s incentive to expand output and lower prices. The Guidelines also state that the greater the possible negative effects on competition, the more the Commission must be satisfied that the claimed efficiencies are substantial, likely to be realised and passed on to consumers, and that the burden of substantiating them lies with the notifying parties. In small markets, arguments about scale economies and the cost of rolling out next-generation networks have a natural resonance. These are precisely the arguments advanced by the parties in the present transaction. Competition authorities would weigh those arguments against the experience of earlier cases with behavioural and entry-based remedies, which BEREC has found to have been mixed. In a market without an established MVNO segment, the design, take-up and effectiveness of any such remedies would be specific to local conditions. How the claimed benefits and any proposed commitments compare with the competitive constraint at issue is likely to be central to any such review.

Which authority decides

Equally, it should be borne in mind that not every transaction falls to the Commission. Brussels examines only concentrations meeting the EU turnover thresholds; others are reviewed by national competition authorities, which nevertheless frequently draw on Commission practice and EU case law.

The Maltese perspective: the MCCAA and the 2017 Vodafone/Melita case

The Maltese market has already faced this exact question once. In May 2017, Apax Partners Midmarket, Fortino Capital and Vodafone Group announced an agreement to combine Melita and Vodafone Malta. The parties argued that the combined company would be better placed to compete with the fully integrated incumbent, GO, in a market where demand for converged “quad play” services was growing quickly. The transaction was conditional on approval by the Malta Competition and Consumer Affairs Authority (MCCAA). As notified to the Office for Competition (OC) within the MCCAA, the deal took the form of an acquisition of Vodafone Malta by Apax Partners Midmarket, with Vodafone Malta to be integrated into MelitaLink, the holding company of Melita.

According to the MCCAA’s 2017 annual report, the OC opened an in-depth (Phase 2) investigation in July 2017. It had serious concerns that the concentration could, prima facie, limit competition, mainly in the mobile telephony market and possibly in fixed markets, without providing sufficient pro-competitive effects. This was the first Phase 2 investigation since the Control of Concentrations Regulations came into force in 2003, and the OC described it as its most comprehensive merger investigation to date. The OC concluded that the commitments offered by the parties did not sufficiently address its concerns. The parties withdrew the notification and abandoned the transaction a few days before a final decision was due to be published. As a result, no final decision on the merits was ever issued.

Public reporting at the time noted that the transaction would have reduced the number of mobile network owners in Malta from three to two. The parties had argued that the number of operators was becoming less relevant given the rise of over-the-top services such as WhatsApp and Skype. GO and consumer groups objected to the deal.

The new transaction: Melita/Epic

The structure of the market has since changed. Monaco Telecom acquired Vodafone Malta and rebranded it as Epic in 2020, and Infrastructure at Goldman Sachs Alternatives has owned Melita since 2025. The newly announced transaction, under which Melita would acquire all of Epic’s shares from Monaco Telecom, remains subject to merger control approval. The MCCAA has said publicly that it is not in a position to comment, and that it cannot yet determine the scope and duration of its assessment with certainty. The OC’s 2017 investigation is the only Maltese precedent on a mobile three-to-two transaction we have identified. Because that case ended in withdrawal rather than a reasoned decision, the MCCAA’s assessment of the new transaction will be its first opportunity to issue a formal decision on such a market structure, against the backdrop of the evolving EU practice described above.

Conclusion: where next for mobile market consolidation?

The Commission’s journey through the mobile sector is better described as an evolution than a reversal. It began by focusing on preserving a disruptive competitor, moved to conditional acceptance of four-to-three mergers coupled with entry-enabling remedies, reached a high point of scepticism with the Three/O2 prohibition and the Italian fourth-entrant remedy, and has since cleared three-player structures more readily, while the Court of Justice has confirmed the breadth of its analytical toolkit. Whether this trajectory extends to two-player markets remains an open question, and one that will ultimately turn on the specific facts of each market. The sheep of Animal Farm changed their chant overnight; EU merger control tends to change more slowly and, as the cases show, on the basis of evidence.

Principal decisions and judgments referred to

COMP/M.3916 – T-Mobile Austria/tele.ring, Commission decision of 26 April 2006

COMP/M.4748 – T-Mobile/Orange (Netherlands), Commission decision of 20 August 2007

M.6497 – Hutchison 3G Austria/Orange Austria, Commission decision of 12 December 2012

M.6992 – Hutchison 3G UK/Telefónica Ireland, Commission decision of 28 May 2014

M.7018 – Telefónica Deutschland/E-Plus, Commission decision of 2 July 2014

M.7612 – Hutchison 3G UK/Telefónica UK, Commission decision of 11 May 2016 (prohibition)

M.7758 – Hutchison 3G Italy/Wind/JV, Commission decision of 1 September 2016

M.8792 – T-Mobile NL/Tele2 NL, Commission decision of 27 November 2018

M.10896 – Orange/MásMóvil/JV, Commission decision of 20 February 2024

T‑399/16 – CK Telecoms UK Investments v Commission, EU:T:2020:217 (General Court, 28 May 2020)

C‑376/20 P – Commission v CK Telecoms UK Investments, EU:C:2023:561 (Court of Justice, Grand Chamber, 13 July 2023)

T‑342/99 – Airtours v Commission (Court of First Instance, 6 June 2002)

C‑413/06 P – Bertelsmann and Sony v Impala, EU:C:2008:392 (Court of Justice, Grand Chamber, 10 July 2008)

Office for Competition (MCCAA) – Proposed acquisition by Apax Partners Midmarket S.A.S of Vodafone Malta Limited (2017, Phase 2; notification withdrawn)

This article is for general information only and does not constitute legal advice. It expresses no view on any particular transaction.