Regulators in South Korea and Japan have been trying to get a third mobile operator to enter their markets. European Union regulators have been insisting that no mergers will be approved that reduce the number of competitors from four to three, as have regulators in the U.S. market. The key observation: regulators believe competition is not best served when there are just two, and in some cases, three, mobile operators. 

In Italy, a new set of developments would create a new market structure, but preserve the four-supplier structure.

To gain regulatory approval for a merger between CK Hutchison Holdings 3 Italia with Vimpelcom’s Wind, Iliad will be enabled to enter the Italian mobile market on a facilities-based basis.

The deal also creates a new number-one provider in the Italian mobile market (3 Italia).

The arrangement will have France’s Iliad entering the Italian market, while CK Hutchison Holdings will be able to merge its 3 Italia with Vimpelcom’s Wind, while still preserving a four-provider market structure, something that has proven mandatory in recent European Commission decisions on mobile market mergers.

Illiad will launch its facilities-based attack by selling a 15.1 percent stake Iliad holds in Telecom Italia, and by buying divested assets from Hutchison and Vimpelcom.

The deal notably involves the transfer of  2×35 MHz 3G/4G frequencies (2×5 MHz at 900 MHz, 2×10 MHz at 1800 MHz, 2×10 MHz at 2100 MHz and 2×10 MHz at 2600 MHz), to Iliad from Hutchison and Vimpelcom, for 450 million euros, with payment phased between 2017 and 2019.

Illiad also will acquire several thousand cell sites in densely populated areas offered by Wind/H3G or rented from third parties.

An undertaking either to bring into force a RAN-sharing agreement covering rural areas with Wind/H3G, or to acquire several thousands of macro sites in those areas from Wind/H3G or third parties. – A 2G, 3G and 4G roaming agreement on the merged network, for a period of five years renewable for one further five-year period at the initiative of Iliad.

The agreement, which involves the sale of frequencies and infrastructure assets to Iliad, is subject to European Commission approval as well as to the Commission’s approval of the H3G transaction combining Wind with H3G, with a decision due by Sept. 8, 2016.

The total deal has been structured to maintain four Italian mobile telecoms operators, a provision considered necessary to allow Hutchison antitrust approval for a merger that otherwise might leave Telecom Italia  and Vodafone Italia as the only other mobile network competitors in Italy.

Last year, when plans to merge Wind and 3 Italia emerged, many observers believed the consolidation of the number-three and number-four operators would boost profit margins, allowing operators to start investing more heavily in their networks.

Italian mobile operator revenues from mobile services have fallen by 40 percent since 2011, according to GSMA, discouraging investment in Long Term Evolution 4G services.

But the EC regulatory authorities have held the line on mergers that reduce the number of competitors from four to three. In the United Kingdom, Denmark and Italy, proposed mergers that would reduce the number of leading providers in mobile markets from four to three have been denied.

The issue now is what happens to competition, retail prices and competition, as Iliad is known for its spirited low-price attacks.