The case for the Ufone-Telenor merger

Why, counterintuitively, fewer competitors might mean better choices for mobile telecommunications consumers in Pakistan

Conventional wisdom has it that the more choices consumers have, the better off they will be. So when a competition regulator like, say, the Competition Commission of Pakistan, is examining a merger, one would expect them to examine the transaction on the basis of a single question: will this increase or decrease market competition? But an examination using metrics like the number of competitors, or even the more sophisticated analytical tools like the Herfindahl-Hirschman Index would be simplistic, and lead one to arrive at precisely the wrong conclusion.

It is our contention that an analysis of the market structure of mobile telecommunications in Pakistan – and the world – would lead one to conclude that the acquisition of Telenor Pakistan by Pakistan Telecommunication Company Ltd (PTCL) is more likely than not going to benefit consumers in the country.

PTCL formally made its bid to acquire Telenor Pakistan in December 2023, and the Competition Commission of Pakistan (CCP) naturally had some questions. They are expected to rule on the matter in latter half of December 2024, and while we have no indication of which way the ruling is headed, we would argue that a ruling that allows the transaction to go through would benefit Pakistan’s consumers. 

Our analysis will examine the dynamics of the industry, why competition has been going down over the past decade or so, and why a PTCL acquisition of Telenor Pakistan – specifically the merger of Ufone and Telenor – will likely be a net positive for Pakistani consumers.

The punchline: Jazz is far too dominant in the Pakistani market right now, and this merger will add heft to its competitors in a highly capital-intensive industry where scale is the key to being competitive.

And if the CCP is looking for case studies to bolster a decision to allow the merger, we will offer evidence from the United States where the exact same situation occurred (four players consolidating into three) and both prices and quality of services improved from the consumer perspective.

But first, a brief overview of how to think about competition in an industry.

Reference Link:- https://profit.pakistantoday.com.pk/2024/12/02/the-case-for-the-ufone-telenor-merger/

Prof. Engr. Zamir Ahmed Awan Founder & Chair, Global Silk Route Research Alliance

Zamir Ahmed Awan is the founder and Chair of the Global Silk Route Research Alliance, a think tank in Islamabad. He studied engineering at Shanghai University in the 1980s, and years later he went back to China as Pakistan's science counsellor in Beijing, from 2010 until 2016, working on science and higher education cooperation between the two countries.…

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