Telia's Bonnier buyout spotlights growing scrutiny of broadcasting deals

Telia’s buyout of Bonnier Broadcasting is drawing close scrutiny in Brussels, where EU case handlers worry that the deal could raise prices or reduce choice for television viewers in Finland and Sweden.

Get used to this level of inspection, as operators ranging from AT&T to Belgium’s Telenet buy up content providers to compete with the likes of Netflix in a shifting digital landscape.

The Telia probe reflects a growing regulatory preoccupation with “vertical” mergers, which combine companies at different levels of a supply chain. Competition enforcers worry that telecom-broadcasting deals can cut off or curb the access rivals get to popular programming such as the Disney channel and Premier League football matches.

Regulators have also voiced increasing concerns about whether competitors should be able to tap into valuable viewing data that reveal which consumers watch what, and when. To what extent is that data unique, giving the buyer a competitive edge?

Although antitrust intervention in vertical deals remains relatively rare, regulators have forced changes to broadcasting deals from Belgium to Spain, and even sought to block them outright in the US and Portugal.

Stop the clock

The European Commission this week disclosed that it has stopped the clock on its review of Telia’s acquisition of Bonnier, pushing back its decision deadline.

The commission opened an in-depth probe into the deal last month, voicing concerns that the acquisition might allow the Swedish telecom operator to “shut out” competing TV distributors seeking access to popular content such as TV4, Sweden’s most-watched commercial television channel.

The worry is that viewers wanting to watch popular Bonnier channels could be forced to switch their subscriptions to Telia’s TV and telecom offerings, draining customers — and advertising income — away from rivals. That could, in theory, weaken competition in the wider market, pushing up prices.

The regulator also suggested that the combined operation could deny competitors access to television advertising space and keep rivals’ customers from using its streaming platform.

Telenet precedent

Thorny issues like these can take time to sort out, as can be seen in the case of Telenet, a cable operator majority-owned by Liberty Global.

Telenet faced months of scrutiny in Brussels — not once, but twice — over its purchase of Flemish television broadcaster and production house De Vijver Media. In each case, the cable operator faced extensive access demands.

The first probe came in 2014, when Telenet announced plans to acquire 50 percent of De Vijver. The deal drew an in-depth investigation by the European Commission, which warned that competitors and consumers in the Dutch-speaking region of Flanders could be “shut out” from receiving popular De Vijver channels Vier and Vijf.

To win EU approval, the parties agreed to license De Vijver’s channels to other TV distributors in Belgium under fair, reasonable and non-discriminatory terms.

The second investigation was triggered in 2018, when Telenet agreed to purchase the remaining half of De Vijver. That review began at the commission, but was handed off to Belgium’s competition regulator, which raised similar concerns about access.

Telenet eventually won approval for the deal, but only after agreeing to more extensive access agreements related to the use of audience data and targeted advertising, which tailors ads to the programs viewers watch. The clearance came last month — a full 14 months after Telenet announced the deal.

Even that timeline looks short compared with the almost two years it took for AT&T to complete its acquisition of Time Warner. The delay came after a decision by the US Department of Justice to block the deal was overturned in court last June.

Telia-Bonnier deal

Telia announced in July 2018 that it had agreed to buy Bonnier — owner of channels TV4, C More and Finnish MTV — for 9.2 billion Swedish kronor (about $1 billion today).

TV4 is the largest commercial television channel in Sweden, with 20 percent of the national market in 2015, according to a report by analyst group Media Landscapes. But state-owned Sveriges Television has “traditionally been the main actor” in the sector, with a market share of around 35 percent, the report says.

One twist in this deal is that the Swedish state owns 37.3 percent of Telia, prompting some politicians and rivals to voice concerns that the government would hold a significant interest in the two biggest TV channels in Sweden.

Programs broadcast on TV4 range from entertainment such as “Let’s Dance” to morning news program Nyhetsmorgon. Bonnier’s pay-TV service, C More, airs popular crime dramas such as “Beck” and holds the broadcast rights to the Swedish men’s soccer league.

MTV — not to be mistaken with the US music video channel — is Finland’s “biggest” commercial TV channel, according to Media Landscapes. It broadcasts police drama “Roba” and has the rights to show UEFA Champions League games.

To substantiate vertical concerns, investigators would need to show that Telia has an incentive to withhold its channels from rivals. Would it make business sense to do so? Would viewers cancel existing subscriptions and sign up to Telia’s offering just to watch them?

Stiff resistance

Other “vertical” deals combining telecom networks with content providers or broadcasters have faced resistance from national authorities in Europe.

Telefónica, for example, won Spanish competition approval in 2015 to buy pay-TV operator DTS Distribuidora de Televisión Digital, only after offering concessions that included granting rivals access to the merged entity’s premium channels.

Patrick Drahi’s Altice had less luck when it sought Portuguese permission to buy Media Capital, the group that owns the country’s largest TV channel, TVI. Altice was forced to abandon the deal after Portugal’s antitrust regulator found that it would have harmed competition by handing Altice the ability and incentive to deny competitors important content and channels.

In opening an in-depth probe into Telia’s deal, the European Commission might be seeking to explore such issues in greater depth and provide some guidance to national authorities.

Before this week’s suspension, the commission had until Sept. 19 to decide on the Telia-Bonnier deal. The regulator will set a new deadline when it resumes the investigation.

A Telia spokesman called this week’s clock stoppage “a normal part of most in-depth investigations,” saying the development “does not affect our view on proceedings.”