Tuesday, September 2, 2014

Facebook and WhatsApp deal under scrutiny

ENGLAND: The European Commission has begun its investigation into the Facebook-WhatsApp deal as requested by Facebook itself. The EC has requested feedback on the deal from key regulators, mobile operators and OTT players.

Neha Dharia, senior analyst, Consumer Services, Ovum, said that The European Commission (EC) has begun its investigation into Facebook’s acquisition of WhatsApp. This investigation has been requested by Facebook itself to ensure an uninterrupted functioning of the service post the acquisition throughout Europe.

Approaching the EC has allowed Facebook to address any concerns at a macro level rather than deal with similar queries across multiple markets within Europe. As a part of its investigation the EC has approached telecom operators, regulators and even Facebook’s competitors for feedback on the deal. The findings of the probe will be taken into account and a decision on the deal (or whether there is a need for further investigation) will be out by the first week of October. Facebook is hopeful to complete the acquisition this year though the permissible deadline for completion has been pushed to August 2015.

Meanwhile in the US, the Federal Trade Commission has already given the deal the go ahead, however it has emphasized the need for WhatsApp to maintain its current privacy level and protect customer data after objection raised by privacy protection organization EPIC.

Ovum does not expect the deal to face much trouble due to this investigation but expects further guidelines around personal data protection for WhatsApp users.  WhatsApp needs to ensure that personal data is protected at all times, as any misuse or leakage of data could cause WhatsApp to lose its market leader status to strong competitors such as Line and WeChat that are not too far behind. The feedback requested by the EC deals with topics such as the impact of the deal on consumer choice, innovation and the impact on traditional services such as SMS and voice calls.

Ovum estimates that services such as WhatsApp have cannibalized SMS revenue by over $32.5 billion globally in 2013. WhatsApp is also set to release its much awaited voice calling service which was due to release in Q2 2014. The introduction of voice calling will have a negative impact on operator voice calling revenue as it will be introduced to WhatsApp’s 600 million strong active user base. Ovum expects regulatory intervention around this in several markets where mobile VoIP is currently not popular.

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