Blog Coverage UK’s Competition Regulator Raises Concern Over the Proposed Mastercard/VocaLink Deal

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LONDON, UK / ACCESSWIRE / January 5, 2017 / Active Wall St. blog coverage looks at the headline from MasterCard Inc. (NYSE: MA). The Competition and Markets Authority (CMA), UK’s primary competition and consumer authority, on January 04, 2017, raised concerns with regards to the merger of MasterCard Incorporated (NYSE: MA) and VocaLink Holdings Limited. CMA’s concerns were mainly about VocaLink’s Link ATM networks. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

One of Mastercard’s competitors within the Credit Services space, Visa Inc. (NYSE: V), announced on January 03, 2017, that it will report its fiscal first quarter 2017 financial results on Thursday, February 02, 2017. AWS will be initiating a research report on Visa following their next earnings release.

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The Mastercard/VocaLink deal

In July 2016, Mastercard International had announced that it is acquiring a majority stake in UK-based VocaLink Holdings Limited through its subsidiary Mastercard UK Holdco Ltd. Mastercard had acquired 92.4% in VocaLink for £700 million (approximately US$920 million). On completion of the deal, the remaining 7.6% shares were retained by VocaLink’s shareholders for a period of three years. VocaLink’s shares are mainly held by leading banks (including Barclays, HSBC, and Lloyds Banking Group) and building societies. Mastercard UK manages the Mastercard, Maestro, and Cirrus credit and debit card schemes and is looking at a larger role in UK’s economy by bidding for the supply of infrastructure services to UK’s interbank payment systems.

VocaLink is a London-based electronics payment Company that offers services like Bacs, the automated clearing house that facilitates direct payments between credit and debit cards and bank accounts; Faster Payments Service (FPS), a real-time payment service using mobile, internet and telephone; and Link ATM service. Apart from these, VocaLink also operates ZAPP, a mobile payments app.

VocaLink’s technology powers the non-card transactions viz employer payroll deposits and consumer bill payments. VocaLink, through its services, processes over 90% of salaries and over 70% of household bills in UK. In 2015, VocaLink had processed over 11 billion transactions and reported revenues of £182 million.

With the VocaLink acquisition, Mastercard expects to expand its range of electronic payments and services in UK and aims to offer more choices to consumers, merchants, and governments while making or receiving payments.

CMA’s findings and suggestions

CMA had undertaken a complete assessment of the merger following concerns raised by industry participants who feared loss of competition in payment infrastructure services to Bacs, FPS, and LINK ATM scheme due to the Mastercard/VocaLink merger.

CMA observed that VocaLink and Mastercard are two of the three credible infrastructure services providers for Link ATM network across the UK. If VocaLink and Mastercard merge the Link ATM networks would not be able to get enough quality bidders when issuing tenders for any infrastructure service.

CMA has no competition concerns with regards to payment infrastructure services – Bacs or the Faster Payments Service. CMA felt that both these services had many other credible alternatives other than Mastercard or VocaLink.

Andrea Coscelli, Acting Chief Executive of the CMA who is handling the case said:

“The LINK ATM network provides an essential service for millions of customers. It’s important that LINK has a good choice of providers when it comes to supplying the necessary infrastructure so it can take advantage of the opening up of payment systems to competition. These concerns warrant a closer investigation in the event that Mastercard cannot address them at this stage.”

CMA has given both companies time until January 11, 2017 to come out with a solution and address the concerns raised by the regulator. By doing so they could easily avoid an in-depth investigation by CMA.

Mastercard’s response to CMA’s Concern

In a press release issued by Mastercard, on January 04, 2017, the Company welcomed CMA’s decision and was pleased with the regulator’s lack of competition concerns regarding payment infrastructure services – Bacs or the Faster Payments Service.

Mastercard statement read:

“The thoroughness of the CMA’s review reflects the significance of this deal and its potential for the industry. We’re pleased to have the opportunity to address their one concern, regarding the LINK ATM scheme, in the timeframe provided. This acquisition promises to bring greater choice and innovation to the payment ecosystem, enabling people, governments, and businesses to pay the way they want to pay.”

Stock Performance

At the close of the trading on January 04, 2017, MasterCard’s share price finished the trading session at $106.39, slightly advancing 0.95%. A total volume of 3.30 million shares exchanged hands. The stock has advanced 22.76% and 12.91% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the Company have gained 3.04%. The stock is trading at a PE ratio of 29.40 and has a dividend yield of 0.83%. The stock has a market capitalization of $116.51 billion as of Wednesday’s closing price.

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