Abstract
Recently there has been an increased attention towards the ex-post evaluation of competition policy enforcement decisions and in particular merger decisions. In this paper we study the effects of two mobile telecommunication mergers on prices. We apply a standard difference-in-differences approach which is widely used in the literature on ex-post evaluation of mergers. For the Austrian T-Mobile/tele.ring merger, we conclude that after the acquisition (for which remedies were imposed) prices in Austria did not increase relative to the considered control countries. For the Dutch T-Mobile/Orange merger, we observe an increase in the mobile tariff prices in the Netherlands in the analysed period, relative to the control countries. We cannot firmly establish whether this price increase was exclusively caused by the T-Mobile/Orange merger or in part by possible price effects brought about by the KPN/Telfort merger consummated two years earlier in the Netherlands. However, we believe that such price increase could be linked to the structural changes brought by both KPN/Telfort and T-Mobile/Orange mergers together.
Highlights
Companies use mergers to combine forces in order to expand markets, develop new products more efficiently or reduce production or distribution costs
For the computation of the price, we focus on active tariffs that are offered by Mobile Network Operators (MNOs) at a given moment in time and exclude tariffs that cannot be selected by new customers any more
The vertical line in Panel a indicates the quarter of the T-Mobile/tele.ring merger in Q2/2006 and the two vertical lines in Panel b indicate the quarters of the two mergers in the Netherlands’ mobile telecom market during the period considered: the KPN/Telfort merger in Q3/2005, and the T-Mobile/Orange in Q3/2007
Summary
Companies use mergers to combine forces in order to expand markets, develop new products more efficiently or reduce production or distribution costs. This study applies reduced-form econometric methods typically used in the socalled treatment evaluation literature, which are commonly applied to the ex-post assessment of competition policy. We compare, both before and after the merger, the price development of the country in which the respective analysed merger took place (“affected country”) with a number of countries in which no structural change took place over the same period (“control countries”). As in many case studies, we observe only a single affected country, and overall we have a small sample (in statistical terms) of control countries We address this challenge by applying recent approaches to improve the estimation of standard errors.
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