Is the Melita-Vodafone deal good for you? Rival CEOs have 4 things to say

Malta’s telecoms market is about to change after the Vodafone Group decided to divest itself of its Maltese company to Melita plc.

The deal is currently under investigation by the Maltese competition office (MCCAA) which has to prevent the creation of a dominant player but will probably be expected to secure some safeguards from the inevitable duopoly that will be created.

GO and Melita are both quad-play telcos: they do fixed and mobile telephony, TV and internet broadband. Vodafone has been a strong mobile telephony operator that also offers.

Melita stands to benefit from Vodafone’s strong mobile and broadband service, especially since the company has had to fend off complaints on speed in the past.

You can read Sunday's article in MaltaToday’s digital print edition to understand why the Malta Communications Authority says the deal could raise mobile phone prices, once GO and Melita settle into a comfortable duopoly.

GO plc CEO Attila Keszeg on the Melita-Vodafone deal

GO plc CEO Attila Keszeg

1. In an interview to The Malta Business Weekly, Keszeg said the Vodafone takeover “indicates our competitors have chosen a different approach” to business, that is, ‘Melita is not interested in matching GO’s investment in mobile telephony and TV’ so instead it will cash in on Vodafone’s strengths.

2. Consumers will see a negative effect on competitiveness. All Melita will want to do is “milk the market” without the competition. Prices will increase, and Melita’s cost of buying Vodafone could be passed on to consumers, thanks to its acquired dominant position. “If that happens, then it opens the door for prices across the board to go up.” Once Melita’s prices go up, so could GO’s prices.

3. As a company Vodafone is leaving Malta, which means Melita might consider paying franchise rights to keep the Vodafone brand. But will Vodafone customers be happy with Melita’s customer service?

4. GO has already deployed the fastest and best 4G mobile network in Malta, Keszeg says. “We have the ambition to deliver the best customer service on the Maltese market.”

Melita CEO Harald Rösch

Melita CEO Harald Rösch

1. In an opinion he penned for The Times, Rösch indicated that infrastructural investment for nationwide Gigabit-capable broadband and 5G is so costly, that operators must be big enough to see a fair return, especially in Malta’s small market. The upshot would be that Melita and Vodafone can keep up this standard only if they join forces.

2. The ‘merger’ (note that GO correctly says that it is a takeover since Melita is the dominant firm here buying out Vodafone’s owners) will ensure that Malta benefits from this critical future investment. Once fused together, Melita will have the scale to make these significant investments.

3. GO and Melita already compete on bundled services, but once combined, Melita’s expertise in fixed and internet services and Vodafone’s strength in mobile will put the company in a better position to compete with GO, which had a head-start on 4G thanks to the infrastructure built by Maltacom.

4. Rösch actually referred to higher prices on mobile phone as a “supposition”, saying that prices are at par with European levels despite the competition the industry faces from free messaging and voices services like WhatsApp and Facebook. Will prices increase? The Melita CEO says the “merger will increase sustainable competition, not reduce it”.

RIGHT OF REPLY

“Vodafone Malta would like to note that the statement [by Keszeg, that Vodafone is leaving Malta] is factually incorrect. Vodafone will retain the largest possible minority stake in the combined entity (49%), and the expertise of its staff will transfer across to the combined entity.  Vodafone is not leaving Malta and has appointed its current CFO as the CFO of the combined company. Melita customers can expect to start benefitting from Vodafone’s excellence in customer service, and the combined entity expects that GO customers will be tempted by the combination of Melita and Vodafone’s combined offerings.”