The Secretariat of Industry and Commerce (SIyC), following a decision by the National Commission for the Defence of Competition (CNDC, for its acronym in Spanish), issued a Report of Objection under the terms of Section 14 of Act No. 27.442 on the Defence of Competition, objecting to the transaction through which TELECOM ARGENTINA S.A. (TELECOM) acquired exclusive control over TELEFÓNICA MÓVILES ARGENTINA S.A. (TELEFÓNICA).

The transaction involves the acquisition of all the shares of TELEFÓNICA, which provides mobile and fixed telephony, fixed broadband and pay TV services nationwide under the Movistar and Tuenti brands. TELECOM is also a telecommunications company that operates in the fixed and mobile telephony (Personal brand), high-speed internet access and cable television (Flow brand) segments.

Following a preliminary analysis, the CNDC identified significant risks due to the potential effects on competition in multiple telecommunications markets, which could be detrimental to the general economic interest.

The merger will result in the elimination of one of the country's three main mobile phone operators, leaving a highly concentrated national market with only two players: TELECOM, with an estimated 58% market share, and AMX (Claro), with 42%.

Also of concern is the accumulation of radio spectrum, which would exceed the regulatory limit of 140 MHz established by the National Communications Agency (ENACOM, for its acronym in Spanish) in all cases, reaching excesses of up to 130 MHz in certain locations. Spectrum is a finite resource that is essential for the provision of mobile services.

In the residential fixed services markets, the transaction would have an impact on 186 locations across the country. TELECOM could obtain shares of more than 40% in 114 localities in the residential internet market and in 143 localities in the fixed telephony market, in many cases reaching positions that could be monopolistic. The jurisdictions that would show the highest levels of concentration include the City of Buenos Aires and its metropolitan region, and numerous locations in the provinces of Buenos Aires, Mendoza, Neuquén and Río Negro.

The transaction could also generate anti-competitive effects in bundled services (quadruple play), where TELECOM would be the only operator with national capacity to offer packages that include mobile telephony, internet, pay TV, and fixed telephony, which could create irreplicable competitive advantages for its competitors.

In the corporate telecommunications services market, under any scenario analysed, the combined market share would exceed 50%, which could create a dominant position affecting competition in this strategic segment.

The SIyC and the CNDC issue an Objection Report when they consider that the notified transaction has the potential to restrict or distort competition in a market in a way that could be detrimental to the general economic interest. For this reason, the parties will be convened to a special hearing to analyse possible measures to mitigate the potential negative effects of the merger on competition.