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 that 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.Â
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. The content in this publication is expensive to produce. But unlike other journalistic outfits, business publications have to cover the very organizations that directly give them advertisements. Hence, this large source of revenue, which is the lifeblood of other media houses, is severely compromised on account of Profit’s no-compromise policy when it comes to our reporting. No wonder, Profit has lost multiple ad deals, worth tens of millions of rupees, due to stories that held big businesses to account. Hence, for our work to continue unfettered, it must be supported by discerning readers who know the value of quality business journalism, not just for the economy but for the society as a whole.To read the full article, subscribe and support independent business journalism in Pakistan
