The Role of Efficiencies in Telecommunications Merger Review.

The telecommunication industry has experienced significant growth and consolidation in the last decade. The desire of large, multinational customers to obtain fully-integrated, end-to-end global telecommunications services from a single source pushed telecom firms to offer multiservice broadband and seamless worldwide telecommunications networks. However, a major barrier to achieving this goal is the significant capital required to construct and deploy a global network. To overcome these constraints, telecom companies typically adopt approaches like--mergers and acquisitions (M&A), joint ventures, legal partnerships and strategic alliances. As the marketplace continues to grow globally, convergence among major enforcement authorities on fundamental competition principles, such as the role of efficiencies, will be critical. The treatment of efficiencies is however controversial and poses many questions. This research paper explores some of the efficiencies-based motivations and rationales for Telecom M&A. It reviews the procedures and regulatory authorities responsible for telecom merger review in the U.S., Europe and Canada. It also examines the treatment of efficiencies in the context of merger review in three jurisdictions and finally it discusses some of the outstanding policy issues related to treatment of efficiencies.