The authorization by the SIC to merge Tigo and Movistar would transform access to telecommunications services in Colombia, but carries with it warnings about significant risks to competition and users.
More than 90% of consumers will be covered by the two large companies, Claro and the new operator resulting from the merger, while the presence of Wom, Virgin and other smaller players will be increasingly limited.
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In the CRC’s analysis, the main risk discovered is the possibility that larger operators will be able to harmonize their commercial policies. Felipe Díaz, Expert Commissioner for the Convention on the Rights of the Child, has highlighted this before Radius W The most noticeable effect can be seen in markets where:
“The competition problems we announced were primarily impacts on the retail markets for mobile services, which are used by all citizens, and are mainly embodied in the increased possibility that the two resulting large companies, Claro and the resulting one between Tigo and Movistar, will be able to coordinate their commercial strategies and that prices could rise for the end consumer.”
This means that with two groups controlling almost all mobile phone lines, the incentives and ease of making similar business decisions increase. Which could translate into price increases or less competitive offers for end users. According to the principles of the operation, monitoring organizations seek to prevent the existence of implicit agreements between leaders, which could affect access to vital services such as mobile phone and Internet connection.
The merger also has a direct impact on mobile virtual network operators (MVNOs) and alternative service providers, which face the risk of relying to a greater extent on the prices and terms imposed by the new dominant company. The authorities’ concerns are that, after the process, the combined company will have the ability to unilaterally modify the terms of its competitors’ access to networks. By increasing prices or changing contracts, these minority players are limited in their room to maneuver.
To mitigate this risk, The SIC ordered that the new company give Wom a discount of between 12.5% and 24.3% on the price of access to the networks, while Virgin and other MVNO operators will be able to access discounts ranging from 11% to 46% depending on the size and type of agreements.
This condition has been established as mandatory and must be maintained during the post-merger monitoring period. The SIC also requires that all contractual amendments between the merging company and smaller operators be reported semi-annually and include clear information on the type of decision (if it is unilateral, resulting from consensus or responsive to regulation).
The potential impact on the residential fixed internet sector has also set off alarm bells. Colombia currently has approximately 10 million home fixed Internet access, and the resulting structure of integration may exacerbate market concentration in major cities.
In this sense, Felipe Diaz said:Today in Colombia we have approximately 10 million fixed Internet connections, and the impacts that can occur as a result of this process are very important because fixed Internet specifically has a local scope.And the municipality and what happens is that we will have two great agents who in some places can reach shares of up to 80% or 90%.
This warning is particularly important in cities such as Medellin and Barranquilla, where mergers may create near-monopoly conditions in residential Internet access, limiting the plurality of plans and users’ bargaining power. According to the regulator’s logic, the lack of effective competition in these local markets increases the risks of price increases and restrictions on access to technological solutions.
To protect competition, the SEC required the resulting company to maintain transparency in billing and respect the current maximum regulatory rate, under periodic supervision. Any change in tariff structure, network access or service packages must be reported and reviewed at semi-annual cycles. In addition, the Authority prohibited the implementation of exclusive campaigns aimed at attracting customers from small operators and placed specific restrictions on the participation of relevant companies, such as ONNET, to prevent misuse of information.
Supervisor Selo Rusnik warned of the possibility of imposing economic sanctions if the merged company did not comply with the obligations it had undertaken, noting that “Failure to comply with the specified conditions can result in penalties whose amounts are already known, with limits that may reach 100,000 the current legal monthly minimum wage.“.
These restrictions are valid for four years, during which authorities such as the Telecommunications Regulatory Authority and the Telecommunications Regulatory Authority will conduct technical and legal audits on all sector-related decisions. The ultimate goal is that the business consolidation will not reduce competition or harm Colombian users, who will continue to be supervised regarding the terms and prices of their mobile, Internet and home TV services.
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