Could Telecom Mergers Lead To Higher Bills For Customers?

Several major telecom companies, as well as Amazon.com, Inc. AMZN, have come under recent scrutiny from the European Union, as concerns over market dominance continue to grow. Among the EU’s expressed risks for consumers are more expensive bills and reduced innovation as a result of these companies’ increasing market share.

Merger Prevalence

Currently, the EU is investigating several merger proposals in the telecom sector, including an upcoming $16 billion deal between British telecom companies Hutchison Whampoa Ltd. (ADR) OTC: HUWHY) and Telefonica’s O2 UK. The deal, if it goes through, would make Hutchison Whampoa the largest telecom operator in Britain.

While operators claim that mergers are necessary to increase their investment, the EU argues that there is no evidence to support this claim and that too many mergers will reduce competition and lead to negative consequences for consumers.

Related Link: 5 Telecom Stocks That Are Likely Buyout Targets

U.S. Concerns

The telecom merger frenzy has been making lots of headlines recently in the U.S. as well. The most recent talks have been between T-Mobile US Inc TMUS and DISH Network Corp DISH.

A 2011 bid by AT&T Inc. T to purchase T-Mobile was blocked by the U.S. Department of Justice for the same reasons that are currently troubling the EU, and a proposed 2014 merger between T-Mobile and Sprint Corp S was dropped after similar regulatory push-back.

Ebook Monopoly?

Amazon is also being actively investigated by the EU for rule violations in the online publishing sector. Amazon remains Europe’s largest player in the ebook industry. While Amazon is credited with popularizing ebooks, the EU has warned the company against using its market dominance to completely shut out the competition.

The EU’s concerns over Amazon arise from the company’s contracts with publishers – contracts which could prevent Amazon’s competitors from being able to strike more favorable publishing deals.

EU Action

Amazon, if found guilty of violating the EU’s terms, could be forced to pay a fine of up to 10 percent of its global turnover. In addition to the ebook investigation, the EU could also take action against Amazon if investigations into its deals with Luxembourg prove that the company has gained unfair market advantage due to tax breaks.

Disclosure: The author holds a short position in Amazon.

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