ACM: further investigation needed into acquisition of Delta’s fiber-optic networks by KPN’s joint venture
The Netherlands Authority for Consumers and Markets (ACM) has decided that a further investigation is needed into the plans of a joint venture of Dutch telecom operator KPN (Glaspoort) to acquire part of the fiber-optic network of Delta Fiber Nederland (Delta). The acquisition concerns fiber-optic networks owned by Delta in various municipalities in the Netherlands, covering a total of approximately 200,000 households. In the Netherlands, Delta is KPN’s largest fiber-optic competitor. Glaspoort is a joint venture, founded in 2021 by KPN and Dutch pension provider APG, and aimed at accelerating KPN’s fiber-optic strategy and, as such, at strengthening KPN’s market position.
The acquisition of Delta’s fiber-optic networks may further strengthen Glaspoort’s market position (and, by extension, KPN’s market position), resulting in negative effects on consumers, such as price increases. That is why ACM has decided that a further investigation is necessary.
Reduced competition for largest telecom operators
On the basis of its preliminary investigation, ACM sees a risk that competition between fixed telecom networks will be reduced as a result of this acquisition. The two largest telecom operators, KPN and VodafoneZiggo, own networks that cover practically the entire Netherlands. However, over the past few years, more than 2.5 million households have received fiber-optic connections from competitors, such as Delta and Open Dutch Fiber. For example, in various parts of the Netherlands, KPN currently competes with both Delta’s fiber-optic network and VodafoneZiggo’s network. That is also true for the areas where Glaspoort wishes to acquire Delta’s fiber-optic network. In those areas, the only competition left after the acquisition will be that between KPN’s (and Glaspoort’s) and VodafoneZiggo’s networks, whereas, at the moment, there are still three competing networks. As part of the transaction, Glaspoort will offer ODF access to the transferred infrastructure in a non-discriminatory manner to Delta and other telecom operators.
Roll-up strategy
Since 2010, KPN has acquired at least seven fiber-optic networks from smaller competitors. This phenomenon of small, serial acquisitions is also referred to as a ‘roll-up strategy’. It is conceivable that each individual acquisition of a small fiber-optic network has a limited impact, but that, with each small acquisition, KPN enhances its market position. KPN’s already formidable position on the market is consequently further strengthened. That may come at the expense of the bargaining positions of telecom operators without national networks of their own, such as Odido and Budget Thuis, and can ultimately lead to upward pressure on consumer prices.
ACM did not need to be notified of most of these small acquisitions by KPN because of their lower turnovers. The fact that ACM does need to be notified of the acquisition at hand is because Glaspoort is involved in this acquisition. ACM has, for a long time already, argued for a legislative amendment enabling it to also assess these types of smaller acquisitions by a larger competitor in the case of anticompetitive risks.
Next steps
Glaspoort and Delta will now have to apply for an acquisition license. In a possible follow-up investigation, ACM will further assess the risks to competition. More specifically, ACM can assess, for example, to what extent cable providers such as VodafoneZiggo exert competitive pressure on the market for access to fiber-optic networks. If a license application is filed, ACM will have 13 weeks to take a decision. If ACM has any questions about the application, that 13-week deadline can be extended.
ACM’s concentration control: mergers, acquisitions, and joint ventures
With any merger, acquisition, or joint venture, there is a question of whether sufficient competition will remain on that market, right after the concentration as well as in the subsequent years. Competition ensures that products 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 companies are allowed to join forces. An acquisition cannot go through if the concentration has negative effects on competition and, by extension, on price, quality, or innovation, and therefore ultimately also on consumers. ACM assesses whether the markets involved will continue to work well for people and businesses, now and in the future.