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In February, BT announced plans to acquire EE, a proposal that has sparked intense debate among industry experts and regulators. Critics of the merger have focused on the combined company’s large share of radio spectrum, arguing it could undermine competition and give the merged firm a significant advantage.
The accompanying graph (not shown here) highlights that EE already holds a larger spectrum allocation than any other mobile provider in the market. If BT’s allocation were added to EE’s, the combined entity would be positioned to deliver greater network capacity and potentially faster speeds than competitors.
Ofcom has responded by saying it is not clear the merger would create a decisive long-term advantage. The regulator points to expected technological improvements and upcoming spectrum auctions as factors that could prevent sustained dominance. Still, the spectrum gap is apparent: Three, owned by Hutchison, lags considerably behind EE and Vodafone in allocation, though it is closer to O2’s level.
Hutchison is pursuing a takeover of O2, subject to approval by European competition authorities. If that deal proceeds, Three would become more comparable to EE and Vodafone in spectrum holdings, but the mobile market would effectively contract to three major operators, reducing the number of large competitors. Ofcom has indicated that this scenario strengthens the case for keeping EE and BT separate to preserve competition.
Despite these concerns, Ofcom has told the Competition and Markets Authority (CMA) that it currently has no major objections to the BT/EE deal. The regulator believes that existing and proposed regulations can address many of the potential harms arising from vertical integration.
“We recognise that, as a vertically integrated firm, BT may have the incentive to discriminate in favour of its downstream divisions, and we impose regulation to address such concerns. We believe the current and future proposed regulation that we apply to BT will limit BT’s ability to discriminate over price, quality and innovation in the provision of leased lines.”
The statement refers to worries that BT could use its extensive national fixed-line network to undercut rivals on price, restrict backhaul supply, or limit options for mobile virtual network operators (MVNOs). To mitigate these risks, Ofcom has proposed regulatory measures, including requiring BT to open access to its “dark fibre” infrastructure so rival operators can compete more effectively.
A BT spokesperson welcomed Ofcom’s submission to the CMA, saying: “We welcome Ofcom’s submission to the CMA and that they have no major concerns in light of their regulatory powers. We’re confident that the acquisition is good for UK consumers and businesses. We look forward to addressing Ofcom’s comments.”
What do you think is the best outcome for the UK market? Let us know in the comments.