PTCL & Telenor Merger: Everything You Need To Know
The Competition Commission of Pakistan (CCP) is close to finalizing a complex and historic merger between PTCL and Telenor Pakistan, a case with potentially transformative effects on Pakistan’s telecommunications industry. This merger will require a careful regulatory approach, as the CCP must balance the rights and interests of the merging entities with the broader market’s needs, ensuring competition remains fair and consumer interests are protected.
CCP’s mandate, established under the 2007 Competition Ordinance, is to prevent anti-competitive practices and monopolies. The ordinance modernized the role of its predecessor, the Monopoly Control Authority, enabling the CCP to oversee mergers that could potentially reshape market structures. A recent example of the CCP’s work is its approval of the Mobilink and Warid Telecom merger in 2016, which resulted in the formation of Jazz, Pakistan’s largest telecom provider. However, the PTCL-Telenor merger presents a much more complex case as it involves far-reaching implications beyond just combining subscriber bases or spectrum assets. The merger could position PTCL with significant power over upstream, midstream, and downstream market segments in Pakistan, raising concerns about potential monopolistic control.
The proposed merger of PTCL and Telenor is more intricate than the Mobilink-Warid case, as it involves a vertical integration that would give PTCL control across the telecom industry’s entire value chain, from wholesale internet services to consumer-level mobile and internet offerings. This could enable PTCL to set lower rates in areas like call termination and data services through its subsidiaries, making it increasingly challenging for smaller long-distance and international operators (LDI) and internet service providers (ISPs) to compete effectively.
Telenor Pakistan currently holds the position of the third-largest telecom operator in the country, with around 45 million subscribers. While it has maintained a significant share of the market, it faces growing competition from other key players like Jazz and Zong, which are leading the market in both subscriber base and revenue. Despite its established presence, Telenor has experienced challenges in maintaining profitability, partly due to intense market pressure and changing consumer preferences. The company continues to focus on strengthening its digital services and customer experience to stay competitive, while also facing regulatory challenges and pressures related to service quality and pricing in a highly competitive environment.
PTCL’s market position is already strong due to its extensive infrastructure, including the largest share of submarine internet cables, the primary wholesale provider for ISPs, and the country’s largest landline network. PTCL currently controls about 48% of the LDI market, and this merger could bolster its influence, potentially creating a pricing structure that favors its own subsidiaries, thereby intensifying competition for smaller operators. The CCP has voiced concerns over these potential outcomes and initiated a comprehensive, two-phase review to evaluate the merger’s impact.
Since September 30, 2024, the CCP has conducted multiple hearings, with the most recent held on October 24, 2024, involving stakeholders and media representatives. Among the participants were PTCL’s legal representatives, led by former CCP Chairperson Rahat Kaunain, who advocated for the merger, citing benefits such as increased competition and market efficiency. Opposition came primarily from competitors like Wateen Telecom, Jazz, and Zong, who argued that the merger would unfairly tilt the competitive landscape in PTCL’s favor. These hearings, presided over by CCP officials including Chairman Dr. Kabir Ahmed Sidhu, focused on examining how the merger could impact different market segments, including retail LDI fixed-line services, mobile telecom services, domestic leased lines, and wholesale bandwidth.
In the initial phase of its investigation, CCP expressed concerns about PTCL’s post-merger market dominance. To address these, the commission widened its assessment scope to include various product markets and infrastructure segments to understand the merger’s potential effects on market power, consumer impact, and long-term industry dynamics. This phase highlighted the need to evaluate how the consolidation would affect competition, prices, and innovation within the telecom industry. PTCL has argued that combining resources would enhance operational efficiency, boost economic growth, and spur innovation, which would ultimately benefit the telecom sector. They maintain that with the merger, PTCL could more effectively compete with Jazz, which currently dominates the market with a 37% share. After the merger, PTCL and Telenor’s combined market share would approach 36.5%, while Zong would retain around 25.6%.
Wateen Telecom, a strong opponent, urged the CCP to assess the merger’s impact across various sub-markets, particularly in areas like infrastructure services, where PTCL’s existing dominance could lead to a de facto monopoly. Wateen cautioned that PTCL’s strengthened market position would make it difficult for smaller players to survive, particularly in midstream sectors like inbound voice services. In presenting their case, Wateen referenced the 1962 U.S. Supreme Court case, *Brown Shoe Co. v. United States*, in which the court blocked a merger that threatened competition by integrating manufacturing and retail operations. PTCL’s legal team rebutted this example, contending that the situation more closely resembles Standard Oil’s case, which established a monopoly in the U.S. oil market through acquisitions and mergers. In 1911, the U.S. government dismantled Standard Oil under antitrust laws, highlighting the need to break up dominant entities when they threaten fair competition.
The CCP’s upcoming decision on the PTCL-Telenor merger could redefine the regulatory framework for Pakistan’s telecom sector. Approval without significant conditions could cement PTCL’s market dominance, possibly marginalizing smaller competitors and affecting consumer choice. On the other hand, imposing restrictions or blocking the merger could encourage a more balanced competitive environment, ensuring multiple players remain viable in the market. This decision will ultimately shape Pakistan’s telecommunications industry, setting a precedent for how the CCP approaches future cases of corporate consolidation.
The PTCL-Telenor merger presents a crucial test for the CCP’s ability to protect market competition while allowing corporate growth and consolidation. The case underscores the importance of regulatory oversight in an industry increasingly susceptible to monopolistic practices. The CCP’s decision will determine not only the future of PTCL and Telenor but also the competitive landscape of Pakistan’s telecom sector, influencing consumer options, pricing, and service quality in the years to come.
