Turkey: Market Analysis In Mobile Communications Blocked Due To Lack Of Collective Dominance Analysis

Last Updated: 16 February 2016
Article by Şahin Ardiyok and Hakan Demirkan

The Turkish mobile communication market is one of the most concentrated markets in Europe.[1] The market is characterized by three operators—Turkcell, Vodafone and Turk Telekom[2]—each enjoying a market share of approximately 46.8%, 30.1% and 23.2%, respectively.[3]

In 2013 the Information Technologies and Communication Authority (ICTA) determined Turkcell as the operator holding significant market power (SMP) and imposed an obligation to publish reference access offer for mobile virtual network operators (MVNO) in its market analysis on Access and Call Origination on Mobile Networks ("market analysis").

Before moving to the arguments of the relevant parties, it should be noted that the legal framework in the telecommunications markets in Turkey shows parallels with the developments in the EU. In this scope, the framework developed in Law No.4502 was inspired by the 1998 regulatory framework in the EU. It relied on an individual licenses regime and the identification of operators with SMP, and the regulatory obligations that could be imposed on them were not designed as an exercise carried out on the basis of competition law, as was the case in the 2002 EU framework. Finally, with the adoption of Law No.5809 in 2008, the regulatory framework became much more compatible with the 2002 EU framework.[4]

Moreover, as in the EU, ICTA initiates a market analysis process in order to make an ex-ante regulation in Turkey. According to Article 5 of the By-Law on Market Analysis, market analysis process shall include the following stages:

  • Definition of the relevant market
  • Examination of the need for regulation in the relevant market
  • Analysis of competition level in relevant market
  • Designation of the operator operator(s) having SMP
  • Determination of the remedies to be imposed on the operator(s) having SMP

Turkcell's application

Turkcell filed a lawsuit against the decision of ICTA requesting the annulment of the market analysis.  In its application, Turkcell stated that barriers to market entry arise from treasury share regulation in Turkey. Actually Turkcell's argument on treasury share regulation is noteworthy as this regulation has caused endless debates for a long time. At this stage, it can be concluded that the treasury share implementation in Turkey creates a competitive disadvantage for MVNOs compared to actual mobile operators owing to the determined amount that all operators must pay as treasury share. In this context, it can be stated that the relevant legislation leads to double-taxation for MVNOs and that treasury share is one of the most important reasons why there is no MVNO operating in the Turkish mobile communications market.

Turkcell also held that even if there is a failure in the market, it cannot be associated with its market power referring to the opinion of the Turkish Competition Authority (TCA) on the market analysis of the ICTA. Within this scope, it was stated that it is not appropriate to impose an obligation to publish reference access offer for MVNOs on Turkcell depending solely on the market share in the retail market.

ICTA's opinion

ICTA made a reference to a so-called three-criterion test which is used in determining which markets are susceptible to ex-ante regulation.[5] According to this test, the decision to carry out market analysis is made when the conditions are cumulatively met:

  • The presence of high and non-transitory barriers to entry
  • A market structure which does not tend towards effective competition within the relevant time horizon
  • The insufficiency of competition alone to address adequately the market failures concerned

In relation to the first criterion, ICTA held that there are high and non-transitory barriers to entry related to the requirement of high financial investments. In the current situation there is no MVNO operating in the retail market in Turkey, which can be considered as a sign of this barrier to entry.

In relation to the second criterion, ICTA held that although there has been a decrease in Turkcell's market share in the retail market, the market does not seem to tend towards effective competition within the relevant time horizon, given that there is no MVNO operating in the retail market.

Finally, as to the third criterion, ICTA stated that competition law rules do not suffice in addressing the market failures due to rapid changes in mobile communications markets, and the only way to respond these changes is implementing ex-ante regulations rather than stable rules.

Consequently, according to ICTA, conditions of three-criteria test are cumulatively met and therefore Turkcell's claim on the annulment of the market analysis should be rejected.

TCA's opinion

TCA presented its opinion on the market analysis of the ICTA, pursuant to Article 5 of the By-Law on Market Analysis, stating that second and third criterion of the three-criteria test were not met in the current situation. TCA held that ICTA's assessments in the market analysis do not comply with the evaluations of the European Commission. In its Working Paper dated 17 June 2002, the Commission propounded that such an assumption should not be made that wholesale access and call origination markets do not tend towards effective competition within the relevant time horizon.

TCA stated that the implementation of the number portability leads to considerable changes in retail market structure and that there is a constant decrease in the market power of the operator holding the highest market power. Therefore, the TCA found that the market structure tends towards effective competition within the relevant time horizon.

Moreover, according to the TCA, three operators in Turkey are in a similar position in terms of satisfying the needs of MVNOs. In this scope, the TCA noted that, in its market analysis, ICTA should take into consideration the fact that three operators' networks are substitute in terms of call origination rather than market shares in the retail market.

TCA also stated that, assessment of the ICTA does not suffice as it does not include comprehensive analysis on the functions of the competition law rules in respect of market failures. In this context, TCA argued that it is possible to intervene in the unilateral practices of the dominant firms within the scope of "refusal to deal" in competition law. Moreover, TCA expressed that boycott practices in which two or more firms in a relevant market refuse to deal with a firm, are also in the scope of competition law. Therefore, unlike ICTA, the TCA concluded that there is no need to make an ex-ante regulation in the market as competition law rules can address the market failures in the relevant markets.

Council of State

In its decision,[6] similar with the ICTA and TCA, Council of State (Court) also held that there are high entry barriers in the relevant market given the fact that there is a need for high investments in order to operate in the market.

In relation to the second criterion of the three-criteria test, the Court made a reference to a situation in the EU stating that currently there are MVNOs operating in mobile communications markets in the EU. In this scope, it was concluded that having MVNOs operating in the markets is a factor that may lead to changes in the market structure. Accordingly, referring to the situation that there is no MVNO operating in Turkey, the Court held that market dynamics in Turkey show considerable differences compared to the EU. Thus, the Court criticized the evaluations of ICTA and TCA, as they do not regard different characteristics of the mobile communications markets in the EU.

The most worth-stressing point in the assessment of the Court is related to third criterion of the three-criteria test. In this case, the Court pointed out the fast-changing characteristics of the mobile telecommunication markets and stated that competition law rules may fail to satisfy the needs of these markets. Therefore, the Court rejected the first argument of Turkcell which propounds that the conditions stipulated for three-criteria test do not meet in the case at hand. In relation to the second argument of Turkcell, the Court referred to the opinions of ICTA and TCA. In this context, it was concluded that the assessments of the ICTA are based solely on the situation in the retail market although the market analysis at hand concerns wholesale market. Later, the Court referred to the explanations of TCA which necessitate the examination of a number of base stations in determining the operator with SMP. Considering the amount of base stations of the operators, TCA had held that three operators in Turkey are in a similar position in terms of satisfying the needs of MVNOs and therefore it is not appropriate to determine Turkcell as operator with SMP.

Finally, the Court concluded that it is not an appropriate approach to make a conclusion on the case at hand without examining the different situations in the EU. In this context, the Court made a reference to the ruling of the Commission in which it vetoed the decision of the Slovenian regulatory agency where an operator with 52.9% market share is determined as operator holding SMP. Moreover, the Court also referred to the approval of the Commission regarding the decision of the Spanish regulatory agency where it was decided that three operators in the country hold a position of collective dominance. Thus, the Court found that there is a tendency to determine operators as SMP jointly with others in the EU.  Accordingly, the Court stated that the evaluation of the ICTA lacks as it does not cover any analysis on designating an operator having significant market power jointly with other operators. Concordantly, the Court annulled the market analysis of the ICTA stating that considering the change in the market shares of the operators, and that three operators are in similar position in satisfying the requests of MVNOs, there is a need for an analysis on criteria concerning designating an operator having significant market power jointly with other operators.

To recap, the decision of the Court is the first decision which includes detailed references to the opinion of TCA and the rulings of the Commission. Thus, it can be stated that the practices of TCA and the Commission are monitored by the Court. Considering the Court's references, it can be claimed that ICTA should take into account the practices of TCA and the Commission more than ever. In addition, as we have mentioned above, the reason why there is no MVNO operating in Turkey is not absence of reference access offer etc. Treasury share implementation in Turkey creates a huge competitive disadvantage for MVNOs compared to mobile operators. As a result of the implementation of this tax, MVNOs in Turkey are subjected to double-taxation which is not commercially viable for MVNOs. Thus, the treasury share tax leads to an unequal financial burden on operators which explains the situation of MVNOs in Turkey. Without solving this tax-related problem, every analysis on the situation of MVNOs in Turkey would stay incomplete.


1 Boynudelik, U. "Analysis of Turkish Mobile Communication Market and Introduction of Mobile Virtual Network Operators", 2011, p.2, http://www.uygarboynudelik.com/wp-content/uploads/2011/05/Bilgi_MBA1.pdf, accessed on 01.02.2016.

2 Previously known as Avea.

3 ICTA, "Quarterly Report on Turkish Electronic Communication Markets", 2015/3, p.61, https://www.btk.gov.tr/File/?path=ROOT%2F1%2FDocuments%2FSayfalar%2FPazar_Verileri%2F2015-Q3_v1.pdf, accessed on 01.02.2016.

4 Atiyas, İ. "Regulation and Competition in the Turkish Telecommunications Industry", 2010, p.2, http://research.sabanciuniv.edu/14658/1/atiyas_reg_com_telecom_update.pdf, accessed on 01.02.2016.

5 Commission Recommendation 2007/879/EC, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2007:344:0065:0069:en:PDF, accessed on 01.02.2016.

6 Decision of the Council of State numbered 2015/895.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Şahin Ardiyok
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