Islamabad, August 20, 2024 – The Competition Commission of Pakistan (CCP) has initiated a Phase II Merger analysis in response to the proposed merger between Pakistan Telecommunication Company Limited (PTCL) and Telenor Pakistan (Private) Limited.
This in-depth review seeks to evaluate the merger’s potential impact on Pakistan’s telecom market, ensuring that competition remains fair and consumers’ interests are protected.
According to a press release issued on Tuesday, the CCP is offering key stakeholders an opportunity to present their concerns regarding the merger. The Commission’s primary focus is on assessing the potential benefits and drawbacks of this merger, particularly its effects on market competition, network coverage, and service quality.
Potential Benefits of the Merger
The CCP’s analysis is considering the potential advantages of the merger, including the creation of cost efficiencies and economies of scale that could strengthen the financial stability of the merged entity. These efficiencies could lead to an expansion of network coverage, an increase in capacity, and improvements in service quality for consumers. By combining resources, PTCL and Telenor may be able to offer enhanced services, which could be particularly beneficial in underserved areas of Pakistan.
However, while these benefits are significant, the CCP must carefully weigh them against the possible negative consequences of reducing the number of major players in the telecom market.
Concerns Over Market Competition
One of the main concerns highlighted by stakeholders is the potential reduction in the number of cellular mobile operators from four to three. This consolidation could significantly alter the competitive landscape, potentially reducing consumer choice and leading to higher prices. Stakeholders have also raised concerns about the possible “disproportionate” share of capacity and spectrum that the merged entity might hold, which could disadvantage smaller competitors.
The CCP is meticulously analyzing various segments of the telecom market, including the Retail Long-Distance and International (LDI) Fixed-line Telecommunication Market, Retail Mobile Telecommunication Market, Wholesale Domestic Leased Lines, Wholesale IP Bandwidth, and the Individual Mobile/Fixed Interconnect Market. The goal is to ensure that the merger does not create an imbalance in market power or stifle competition.
Risks of Capacity Asymmetry
A key focus of the CCP’s investigation is the potential for “capacity asymmetry” in the relevant market. This refers to the risk that the merged entity could dominate Pakistan’s mobile network capacity, leaving competitors with insufficient resources to compete effectively. Such an imbalance could lead to reduced innovation and a decline in service quality, ultimately harming consumers.
Timeline and Regulatory Review
PTCL filed the pre-merger application on March 6, 2024, and the CCP had 30 days to conduct a preliminary review and issue a Phase I order. On May 3, 2024, the CCP issued the Phase I order, which identified potential competition concerns in the telecom sector, prompting the need for a more detailed Phase II review.
The CCP now has 90 working days to complete this comprehensive analysis and issue a final order. During this period, the Commission will continue to engage with stakeholders and scrutinize every aspect of the merger to ensure that the telecom market remains competitive and that consumers are not adversely affected.
Conclusion
The CCP’s ongoing Phase II Merger analysis of the PTCL-Telenor merger is a critical step in safeguarding competition in Pakistan’s telecom market. While the merger could bring significant benefits, the Commission’s careful review will ensure that these advantages do not come at the expense of market competition or consumer welfare. As the CCP moves forward with its analysis, the outcome of this merger will likely set a precedent for future consolidations in the telecom sector.
