The Impact of Mobile Consolidation on Innovation and Quality*

Abstract

Historically, authorities tasked with reviewing mobile mergers have assessed the overall effects on consumers primarily on the basis on how mobile mergers affect prices in the short-term ('static' effects). However, innovation and quality ('dynamic' effects) have not been modelled and evaluated properly. Likewise, the existing economic literature that analyses the impact of mobile mergers primarily focuses on price effects, and only a few, more recent studies show how mobile mergers impact investments. Building on these, a recent study published by the GSMA analyses how the 2012 merger in Austria between H3G and Orange affected innovation and quality. The study is the first of its kind in analysing the impact of a mobile merger on measures of consumer outcome other than prices. It finds that both improved because of the merger. These positive effects start to take place two years after the merger. Once they materialise, the experience of consumers improves for both the merging companies’ customers and for the customers of the other mobile networks, as competition on innovation and quality intensified.