Green light for UK tower consolidation

On 22 April 2020, the UK Competition and Markets Authority (CMA) cleared Cellnex’s acquisition of Arqiva’s UK telecoms infrastructure business. Cellnex, which currently has a small share of the independent supply of communications infrastructure in the UK, will acquire more than 7,000 sites currently operated by Arqiva, including towers, pylons and masts across the UK – making it the largest independent tower company in the UK according to the Spanish company. The deal is part of the global trend in tower deals, largely driven by operators offloading telco infrastructure to investment funds and specialist third party operators. It is widely seen as heralding an era of consolidation in the UK. It was closely scrutinised by the CMA – consistent with the approach taken by other competition regulators globally, including the European Commission which has been considering network sharing agreements in Italy and the Czech Republic.

As part of its analysis, the CMA considered the market for access to passive infrastructure used by wireless communication providers in the UK, which comprises both access to macro sites and access to small cell sites.

In respect of macro sites, notwithstanding that Arqiva holds a significant share of (independent) supply, the CMA considered that there remained other credible alternative suppliers and that self-supply, by MNOs and the two existing network sharing JVs in the UK, would continue to be a material competitive constraint.

In respect of small cells, it did not find the parties to be close competitors.

In both segments, and particularly regarding small cells given their importance for 5G roll-out, the CMA carefully scrutinised possible issues of potential competition, i.e. whether the deal would remove an important future competitor. This is consistent with the CMA’s approach in digital mergers where theories of harm regarding removal of a potential competitor have loomed large. The CMA considered whether Cellnex would have become an important constraint on Arqiva absent the deal. It concluded that would not be the case in either market segment, based on a review of Cellnex’s internal documents which the CMA considered revealed modest plans for expansion. The fact that the UK market is burgeoning was a relevant additional consideration in respect of small cell deployment. Although the CMA closely considered the impact of a contract for the commercialisation of streetscape assets in London’s transport network, it concluded that there were a number of emerging companies and alternative technologies sufficient to ensure customers would have a significant choice even after the merger and notwithstanding the London transport project.

The UK wide rollout of 5G and the Shared Rural Network project were an important element of background, and relevant to the CMA’s analysis. The Shared Rural Network project is a £1bn project signed on 9 March 2020 between the UK Government, Ofcom and the four MNOs, by which they commit to extend the geographic coverage of 4G to 95% of the UK by 2025. The project envisages the opening up and sharing of existing masts and infrastructure, to close ‘partial not spots’ (where currently at least one but not all four MNOs are active), as well as Government funding to support the build of new masts. The commitments have been included in the operators’ licences to make them legally binding.

The CMA’s clearance decision comes at a time when network sharing, and tower deals, are subject to close scrutiny by competition regulators. In March 2020, the European Commission conditionally approved the creation of a JV in Italy which combined a large pool of towers belonging to two operators, based on the JV’s commitments to offer access to the infrastructure on reasonable and non-discriminatory terms in certain Italian municipalities. In August 2019, the Commission sent a ‘statement of objections’ to parties to a network sharing agreement in the Czech Republic. While competition authorities are mindful of the imperatives of 5G roll-out across the EU, they continue to pay close attention to competition issues in the sector.