Competition watchdog calls on EU to block Three's takeover of O2

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The £10.25 billion takeover of O2 by Hutchison’s Three should be barred or so severely restricted that it would not be worthwhile, the UK competition watchdog said. 

The takeover, which was launched last year, would cut the number of UK mobile networks from four to three and potentially push up prices for consumers.

In an unprecedented move, Alex Chisholm — chief executive of the Competition and Markets Authority — published a letter to EU Competition Commissioner Margrethe Vestager, detailing his opposition to the merger and calling on her to prevent “long-term damage” to the UK mobile market. 

He said: “We believe this merger would give rise to a significant impediment to effective competition in retail and wholesale mobile telecoms markets in the United Kingdom.”

He added that the Commission should order Three and O2 to sell enough spectrum and mobile infrastructure to create a fourth mobile firm and if it could not do that “the only option is… prohibition”.

“We believe this merger would give rise to a significant impediment to effective competition.”

Alex Chisholm

Brussels took the investigation into the deal over from the CMA and has a deadline for its decision of May 19. 

It has already put a long list of potential remedies to Hutchison which, in turn, has come up with three sets of offers of what it could do to push the deal through. The latest of these, last week, included freeing up more mobile spectrum to so-called virtual mobile networks run by Sky, Virgin and Tesco. 

But Chisholm does not believe that goes far enough. He said: “The proposed remedies are materially deficient as they will not lead to the creation of a fourth Mobile Network Operator capable of competing effectively and in the long-term with the remaining three MNOs such that it would stem the loss of competition caused by the merger.”

Chisholm is adding his voice to that of Sharon White, chief executive of telecoms regulator Ofcom, who made her opposition to the deal — on the grounds it would reduce competition in the UK — clear from an early stage. 


Recipient: EU Competition Commissioner Margrethe Vestager (Michael Reynolds/EPA)

Chisholm said there is only one appropriate remedy to the deal if the Commission is to “eliminate the competition concerns in their entirety”. He said it must be “comprehensive, effective and capable of ready implementation”. That, he added, would be “the divestment — to an appropriate buyer approved by the Commission — of either the Three or O2 mobile network businesses… or possibly allowing for limited ‘carve-outs’ from the divested business”.

If the merger went ahead, the UK would end up with just three networks with the other two being BT’s recently acquired EE, and Vodafone. Ofcom has argued that other countries where this has happened have seen prices rise by as much as 20%.

Hutchison had no immediate comment to make on the CMA’s intervention.

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April 12, 2016 |
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