Portuguese Watchdog Halts Telco Merger

The Portuguese Competition Authority (AdC) blocked Vodafone’s acquisition of Cabonitel, owner of mobile and fixed operator Nowo. The body argues the deal would hurt competition and harm consumers.

AdC announced its decision following an in-depth investigation into the proposal, which found Vodafone would have increased market power if approved while claiming the deal reinforced barriers to market entry and would cause a detrimental effect on consumers. The authority argued that Nowo exerts considerable competitive pressure on other operators and that its merger with Vodafone would result in significant price increases. Vodafone’s products will increase to a lesser extent, and services from competitors will rise marginally.

The proposed acquisition is intended to boost the former’s market dominance, AdC further claimed, leading to losses of consumer surplus and of social welfare in the order of €54 million and €20 million per year, respectively. The merger will also increase the degree of coordinated behavior among Vodafone, NOS, and MEO, the country’s main operators, which would result in barriers to entry for new players. AdC particularly pointed to the concentration of spectrum in Vodafone, which the company would make inaccessible to new entrants.

Vodafone previously presented commitment packages including providing a wholesale offer for its fiber network to Digi, which is in the process of launching its services in Portugal. It further proposed the sale of Nowo’s recently bought spectrum usage rights to the new entrant to address AdC’s concerns, plans the authority found unsatisfactory. Vodafone revealed its intention to acquire Nowo’s owner Cabonitel from Lorca JVCO in October 2022, in a move to increase its customer base and fixed network coverage in the country.