Cantillon: Juggling for position on bandwidth

Eircom's decision to challenge the acquisition of Irish mobile operator O2 by Hutchison Whampoa, the Hong Kong parent of rival Three Ireland, is entirely predictable.

Its Meteor mobile subsidiary would be left trailing a distant third behind current market leader Vodafone and a merged Three/O2.

In round terms, Vodafone and Three/O2 would have about 40 per cent each with Meteor accounting for the balance.

Then there's the matter of the network sharing agreement that Eircom has with O2. Dating back to 2011, it was designed to achieve cost efficiencies for both groups by sharing infrastructure and avoiding unnecessary duplication of expensive kit.

If that deal were scrapped by Hutch, Eircom could be at a significant cost disadvantage to its competitors.

So it’s no surprise that Eircom is seeking concessions, namely the re-allocation of valuable 3G and 4G spectrum bandwidth to Meteor. You get one bite of the cherry in these situations and Eircom is seeking to exploit this to the maximum.

Eircom’s view is that four blocks of spectrum (in the 1800 and 2100 megahertz categories) should be allocated to Meteor to help level the playing field. It also wants one of Three/O2’s blocks at 900 megahertz put out to tender.

One wonders what Vodafone makes of all of this. The British-owned mobile operator has long led the market following its acquisition more than a decade ago of Eircell, Eircom’s mobile subsidiary.

You’d imagine that Vodafone would be happy for the commission to reduce the influence of a merged Three/O2. But it might not be so enthusiastic about Eircom getting additional spectrum on the cheap, given that it paid €160.85 million up-front to Comreg for 12 blocks of spectrum in late 2012. It has also committed to an additional €119.79 million in payments out to 2030. By contrast, Eircom paid €144.78 million for its 12 blocks, with an additional €99.64 million due over time.

The European Commission will ultimately decide what remedies it must offer and it is not at all clear that Brussels supports Eircom's view of the market entirely. It has until March 24th to deliver its verdict.