In July, we launched the EU Merger Control series, outlining Telefónica’s position on the review of the EU Merger Guidelines, and welcomed this as an opportunity to strengthen Europe’s competitiveness and build a framework that supports innovation, resilience and strategic autonomy.
The first post examined why the Commission’s economic assessment approach must evolve ahead of any reform of EU merger control rules. The second post provided an overview of Telefónica’s response to the consultation. The third post set out the sector’s call for an in-depth review of the merger guidelines to ensure they are fit for today’s EU challenges. The fourth post related to the analysis of market power based on structural features and other market indicators. In the fifth post, we shared our Policy Brief, which provides a clear and concise overview of these issues and a summary of Telefónica’s technical contribution to the ongoing revision of the Merger Guidelines, focusing especially on the role of investment, innovation and scale. This sixth post will explain Telefónica’s position on the role of sustainability in merger control analysis and give some hints on how to measure sustainability.
Sustainability: the new key element in merger control analysis
Today, the environmental impact of a product or service is recognized as an intrinsic element of its quality and a key driver of future innovation. Consumers worldwide are increasingly demanding more sustainable products and services. In response, companies such as Telefónica are embedding sustainability into their core strategies, and firmly committed to achieving net-zero emissions by 2040 and is actively decarbonizing its operations and its value chain, to provide low-carbon connectivity and digital services. To reach this goal, the company is investing in energy efficiency and exclusively using renewable electricity in all its operations in Europe and Brazil.
In addition, the company is deploying more energy-efficient technologies such as fibre, for example, is 85% more efficient than copper, and 5G networks consume up to 90% less energy than 4G per traffic.
Despite managing 9,3 times more data traffic than in 2015, Telefónica has reduced its total energy consumption by 8%, through a wide range of energy efficiency projects. This demonstrates that digitalisation, when designed responsibly, can support both growth and climate goals.
Telefónica is making decisive progress towards its decarbonisation objectives, yet achieving the efficiency, innovation and scale required to meet European targets largely depends on its investment capacity. In this context, attaining greater scale within the telecoms sector is essential to drive sustainability, as more sustainable processes demand prior investment and continuous innovation efforts.
What specific role should sustainability play in the merger control analysis?
Sustainability has not traditionally been part of competition analysis; it has become a relevant element of consumer welfare and an innovative lever. On this basis, Telefónica contends that it should be fully integrated into all stages of merger control assessment—either as a competitive parameter when companies compete on offering more sustainable products or services, or as part of the broader consumer welfare analysis when sustainability enhances product quality and drives innovation.
In addition, sustainability efficiencies have the particularity of benefiting not only the consumers present in the relevant markets of the merger but also many other consumers and citizens in society as well as the environment itself. Beyond their immediate economic impact, these efficiencies contribute to advancing the European Union’s climate commitments, strengthening the resilience of its economy and infrastructure, and ultimately helping to protect citizens from the increasingly severe effects of climate change.
Sustainability in the loss of competition analysis
As explained in the previous posts, Telefónica proposes incorporating the full concept of consumer welfare -encompassing price, quality, innovation and choice- in the merger control analysis, grounded in the economic approach of dynamic efficiency. In addition, the Commission should assess sustainability as a parameter of competition when companies compete on the offering of more sustainable products and services.
To properly address the “loss of competition analysis”, the Commission needs to assess the pre-merger and post-merger conditions for competition, including sustainability when it is a parameter of competition, or at least, considering sustainability when it is part of the quality and innovation parameters. This would involve conducting a comprehensive analysis of the supply side of companies and sectors, i.e. an analysis of what their function of production is and their capabilities for competing pre- and post-merger.
When companies compete on sustainability, the key question to be asked is: will the merger create sufficient conditions for competition to exist in sustainability?
Sustainability in the efficiencies analysis
Telefónica considers that the Commission should analyse efficiencies considering also all dimensions of competition and the features of the supply side in each case, under a standard of proof which makes recognition of efficiencies feasible.
When properly assessed and guided, mergers have the potential to generate synergies that contribute directly to the green transition. In fact, sustainability efficiencies are a clear example of efficiencies that benefit both the consumers present in the relevant markets of a deal, as well as many other consumers and citizens and the environment itself.
Some examples of benefits of mergers supporting the green transition:
- Green Efficiencies and Measurable CO₂ reduction: Mergers can deliver substantial emissions reductions through network consolidation, and energy optimisation.
Example: Consolidating overlapping mobile networks can reduce energy use and emissions by decommissioning redundant sites.
Metric: Energy consumption per GB of data, or CO₂ emissions avoided through infrastructure optimisation. - Accelerated Innovation in Clean Technologies: Telecom mergers can combine R&D efforts and innovation capacities to accelerate the development of more sustainable digital infrastructure—such as low-energy network equipment or AI-driven systems for energy optimisation.
Example: A merger between two operators can increase the capacity to develop and deploy more energy-efficient 5G or fibre networks across rural areas, reducing the carbon intensity of data transmission. - Sustainable Energy Investment Capacity
Consolidated telecom operators can improve their ability to invest in clean energy systems and battery storage solutions and use of renewable energy in telecom infrastructure, particularly in network operations and data centres.
Example: Merged operators can jointly invest in battery storage systems to back up renewable energy supply for their networks, improving resilience and reducing dependency on fossil-fuel-based grids. - Enhanced Circular Economy Capabilities: Vertical integration and coordination can improve device lifecycle management, promote refurbishment and reuse, and facilitate recycling of electronic waste.
Example: Mergers can enable shared logistics and repair facilities for returned devices, increasing recovery rates of valuable materials and reducing landfill.
Last, it is key that Commission considers environmental efficiencies that indirectly benefit a broader spectrum of consumers, beyond those directly affected by the merger. Mergers can generate efficiencies and positive spillover effects relating to these objectives and across interconnected sectors of the economy, ultimately benefiting a wider range of consumers and contributing to systemic improvements.
Sustainability as commitment for the Parties
An infrastructure-based merger (such as telco mergers) would generally enhance the parties’ scale, capabilities, and incentives to compete across all dimensions of consumer welfare.
However, where the Commission has doubts regarding the parties’ post-merger incentives in sustainability efficiencies, it is appropriate to consider investment-related remedies. Such remedies can also take the form of sustainability commitments which would clearly lead to the consecution of key EU objectives. The imposition of binding conditions on the Parties would create incentives as well as monitoring guarantees, especially where a sectoral regulator is in charge of the monitoring.
In this context, the Commission could consider requiring specific sustainability commitments from merging telecom companies, aligned with the EU’s climate targets.
Commitments, embedded in the merger approval process and monitored effectively, would not only help mitigate competitive risks but also contribute directly to the EU’s decarbonisation agenda and enhance the telecom sector’s role in the digital and green transition.
Telefónica is conscious of the challenge this supposes and is ready and willing to cooperate with the Commission to find the best economic and legal approach to ensure that the Guidelines are fit for the needs of consumers, companies and public administrations in Europe.
In the next post we will delve deeper into the dynamic efficiency economic theory.
