ACM clears acquisition of Youfone by KPN

The Netherlands Authority for Consumers and Markets (ACM) has cleared the acquisition of telecom provider Youfone by rival telecom company KPN. ACM has carried out an extensive investigation into the acquisition’s consequences for the market for mobile telecommunication services. The investigation has revealed that competition will not be reduced significantly as a result of the acquisition, since no important competitive force will be eliminated, and sufficient other providers will continue to exert competitive pressure.

KPN and Youfone both provide mobile telecommunication services to consumers and business users. Youfone is a small yet fast-growing provider of sharply priced mobile plans, primarily targeting consumers. These are known as no-frills plans. Youfone does not have a network of its own, and uses KPN’s mobile network.

Why has the acquisition been cleared?

In the notification phase, ACM analyzed the acquisition’s consequences for mobile services and particularly the more economically priced services. The investigation has shown that, even post acquisition, consumers will still have sufficient options. Next to Youfone, numerous other providers are active, offering competitively priced mobile plans. Moreover, an economic study has revealed that consumer prices are not expected to change significantly. Based on this economic analysis, the acquisition’s price effect is estimated to be between -0.4 and 0.7 percent. The acquisition of Youfone is therefore not expected to produce any negative effects.

In addition, ACM has concluded that this acquisition does not significantly affect KPN's incentive to provide access to other mobile providers without networks of their own (so-called MVNOs) to its network. The investigation shows that MVNOs face considerable switching barriers, and that they have not switched during the past ten years. Nonetheless, it appears they have been effective at threatening to switch networks, such as to Odido or VodafoneZiggo. Such threats ensure that MVNOs are able to secure better terms in the negotiations with KPN.

Since ACM sees considerable switching barriers for MVNOs, and as the effectiveness of the threat to switch depends on the access policy of providers with networks of their own, ACM will continue to keep a close watch on the market for mobile telecommunication services.

Why does ACM assess acquisitions?

With every acquisition, there is the question whether sufficient competition remains, directly after the transaction as well as in the subsequent years. Competition ensures that products or services are of high quality and that they are offered on the market at competitive prices. Competition also promotes innovation. That is why ACM decides in advance whether or not businesses are allowed to join forces. ACM assesses whether the markets will continue to work well for people and businesses, now and in the future.