Colombia’s Competition Authority Approves Movistar-Tigo Merger

The decision explained

The SIC’s decision to condition the merger stems from a thorough review that identified both important pro-competitive effects and considerable risks for competition in the country.

Pro-Competitive Benefits (The Rationale for Approval):

• Enhanced Rivalry: The consolidation is expected to create a stronger operator with the capacity to reduce costs, improve operational efficiency, and challenge the current market leader, CLARO. The union of TIGO and MOVISTAR’s capabilities is seen as promoting greater rivalry in quality, innovation, and value-added services.
• Coverage and Investment: The combination of networks is projected to lead to a significant expansion of geographic coverage, particularly in rural and underserved areas, and is supported by the Ministry of ICT (MINTIC) as a way to close the connectivity gap. The merger is also expected to enable the reallocation of resources toward infrastructure and innovation.

Anticompetitive Risks (The Rationale for Conditions):

• Market Coordination: The SIC flagged a serious risk of explicit or tacit coordination between the new integrated entity and the market leader (CLARO) due to the elimination of one major competitor.
• Wholesale Market Access: Stakeholders have raised significant concerns that the merged entity’s increased market power in wholesale services could allow it to impose restrictive or abusive contractual clauses on competitors, including mobile virtual network operators (OMVs) and mobile network operators (OMRs) that rely on wholesale access, such as WOM.
• Fixed Internet Concerns: The regulator identified concerns in specific municipalities regarding fixed internet and service packages (Dúo Play and Triple Play), where the integration could increase concentration, potentially leading to higher prices and a deterioration of service quality.
• ONNET Infrastructure: A specific concern was raised regarding the control MOVISTAR exercises over ONNET (fibre optic infrastructure), which could allow the combined entity to influence ONNET’s decisions or access competitor data, potentially creating barriers in the fixed internet market.

Regulatory implications

Even with these conditions, uncertainty prevails, as there are no specific measures to mitigate economies of scale, artificial market growth, or a lack of competitive tension between the two main players, which are expected to control more than 90% of the mobile market.

To mitigate some of the identified risks, the SIC has incorporated specific conditions primarily aimed at safeguarding wholesale markets, requiring the interveners to ensure that all contractual conditions offered to OMRs and OMVs maintain strict criteria of equity, transparency, and non-discrimination.

The resolution underscores that, while the integration can reshape competitive dynamics, it does not automatically remove the conditions that led the Communications Regulation Commission (CRC) to declare CLARO’s market dominance.

This SIC’s decision sets an important benchmark, demonstrating that Latin American regulators are prepared to approve consolidation for reasons of scale and efficiency, but only when it is coupled with firm structural and behavioural remedies to protect vulnerable segments of the value chain and foster long-term competition.

Why it matters

With this decision, Colombia enters a new phase in the transformation of the telecoms market. Both mobile and fixed services will be affected, although specific user protection measures were not included.

• Telecom market structure: The integration creates a second large operator capable of challenging Claro, but also raises the risk of higher concentration in fixed markets.
• Municipal-level risk management: Remedies target specific municipalities where the SIC identified potential for price increases, quality reductions, or weakened competitive pressure.
• OMV/wholesale impacts: The SIC explicitly notes risks for virtual operators dependent on Movistar’s wholesale access, signalling heightened regulatory attention to wholesale conduct after integration.
• Service continuity in rural areas: The five-year freeze on dismantling rural infrastructure reinforces the government’s broader universal access and connectivity objectives

Finally, it remains to be seen how the authorities will redesign connectivity policies considering the new market structure. Spectrum caps, economies of scale, asymmetric regulation, competitiveness protection, and user protection are all fragile areas that will probably require new policies and regulations to guarantee coverage, quality of services and affordability continue to satisfy user’s needs.