European Communications

Last update11:47:44 AM

“E5” operators risking reputation with meetings

Some of Europe’s biggest operators are risking their reputation by having “unusual” meetings together, a leading lawyer has told European Communications.

It emerged yesterday that the European Commission has requested information from Deutsche Telekom, FT-Orange, Telecom Italia, Telefonica and Vodafone – known as the “E5” – about several meetings they have held recently.

A statement from a spokesman for EU Competition Commissioner Joaquin Almunia, published by The Wall Street Journal, stated that the requests for information relate to “the manner in which standardisation for future services in the mobile communications area is taking place."

There is no suggestion that any wrongdoing has taken place.

"These fact-finding steps do not mean that we have competition concerns at this stage, nor do they prejudge the follow-up," the statement continued.

However, Robert Vidal, head of competition, EU and trade at law firm Taylor Wessing believes consumers, suppliers and investors will be questioning why the operators are having such meetings at all.

“[The meetings] are unusual and certainly raise suspicions,” Vidal said in a phone interview.

“Meetings between competitors will always be of potential interest to competition authorities and should be treated with extreme caution."

They are especially risky in a concentrated market where participants are restricted to a few, major players, according to Vidal.

He added that consumers will generally assume the worst and that operators’ shareholders would no doubt be getting ready to ask some tough questions.

The meetings are taking place against a backdrop of falling revenues and increased regulation.

Of the E5, only Telefonica and Telecom Italia registered revenue increases in 2011.

“Operators are getting squeezed and are clearly unhappy with the current state of affairs,” said Vidal.

“The meetings suggest they want to try to set the agenda and provide an industry view.”

However, Vidal said the benefits were questionable.

“From a PR perspective, the E5 are not benefitting and it is unlikely consumers will benefit so the question is what do the operators gain from these meetings?” he said.

The news of further friction comes amid an escalating war of words between operators and the European Commission.

Last month, Neelie Kroes, vice president of the European Commission responsible for the Digital Agenda, said she did not respond well to threats after the Vodafone CEO called for an end to autopilot regulation.

Last July, Kroes lambasted operators for enjoying “outrageous margins”, particularly on mobile data.

Vidal said he also agrees with Kroes that the industry does need more competition and that more regulation was required.

It remains to be seen whether the EC decides to progress with a full investigation.

If it does so, Vidal said there will only be one winner and it won’t be the operators.

“European Commission investigations are very unpleasant,” he warned.

Nevertheless, Vidal said he expects the E5 meetings will continue; he cautioned, however, that they should not be common place and warned operators to be “very disciplined.”

It is clear to see why – the EC has the power to fine infringers up to 10 percent of group worldwide turnover if found guilty.

Equally, operators continue to trumpet the trust they enjoy with their customers as a competitive advantage.

However necessary or innocuous they view these meetings to be, operators simply cannot jeopardise any advantage they have in the current climate.