Implausability Corner #2 - The Merger

 This month's award for the most blatently self-serving load of PR flummery to be heard for a long time goes, by huge popular acclaim, to the spokesman for Vodafone. The mobile comms giant wishes to merge with another massive company, Three, to form a conglomerate that will have something like half of the UK mobile phone market.

Naturally there are concerns that this is an attempt to stifle the market and use economies of scale to drive others out of business, significantly reducing competition and enabling the directors to give themselves huge salary boosts plus bonuses because they will now be directing a much bigger enterprise than before. Oh, and presumably profits will have to go up to justify whatever the cost of the merger is, and in an essentially static market place there is only way for that to happen (and I'm not talking about cutting portion size in the middle-managers' canteen).

The Competition and Markets Authority has provisionally concluded the proposal would weaken competition. Good spot guys, but lose several house points for the weasel-like chickening out of "provisional" [erm, weaselly and chickening in the same phrase. I don't like it, I don't like it one little bit: Ed]

 Naturally the big boys of telecomms took their fight to the airwaves and I caught the interview on the morning broadcast on the BBC

Vodafone's CEO for European Markets, Ahmed Essam, told the Today programme, on BBC Radio 4, that he still believed the merger would make a better network for customers, and add to the competition in the market.
source: BBC

 Well he would, wouldn't he? There has never been a merger in history that has increased competition. The entire purpose of mergers is to reduce it without the economically efficient way of being better than the others. Because a merger does it quickly whereas actually being better and gradually atracting business through lower prices, better network coverage and better customer service ¹ takes time and requires taking risks. Although this is supposed to be what competitive markets are all about, the Vodafone/Three tie-up is all about cutting risks so that their future investment has a guaranteed customer base.

But the Vodafone CEO says it will add to competition, and sure he is an honourable man. 

There is one potential technical justification for the claim. If a very dominant player already controlled the market, and this merger would create a business sufficiently strong to challenge it, then there might be good reason for approval. But the mergees² already have the market in their grip. Does this in Vodafone seem like competition? But Mr Essam says it will increase competition and he is an honourable man, so all they are all, all honourable men. 

I suppose I must declare an interest. I am indirectly a customer of Three, via a reseller called Smarty who, for a very small amount of monthly cash, give me all the minutes, texts and internet data I could wish for, and throw in European roaming as well.  I am a little nervous that this happy state of affairs may not last once the merger goes a little sour, as they usually do, and costs far more than expected to make a single system of the two existing ones, as invariably happens, and the shareholders begin shifting uneasily in their seats at AGMs and things begin to be said about whether the merger was delivering all that had been promised. But by then, no doubt, Mr Essam and his chums will have taken their massive bonuses for making it happen and it really won't be their problem at all. It will be ours, the consumers.

Footnotes:

1. This was never going to happen, comments of forums such as on Reddit make it very clear how awful it is

 2. Do you like it? I may launch a Kickstealer campaign for a book called "My 100 best neologisms" if there is enough support.