(Image Credit: iStockPhoto/DNY59)
Some of the United Kingdom’s largest mobile telecom companies are scheduled to attend a closed hearing on March 7 organized by the European Commission to examine the proposed merger between O2 and Three UK.
Hong Kong conglomerate CK Hutchison, owner of Three UK, agreed last March to buy Telefónica’s O2 for £10.25 billion, subject to regulatory approval. Regulators worry the deal would significantly consolidate the market—reducing the number of major mobile operators from four to three—and would allow a currently smaller operator to leapfrog competitors and become the largest by subscriber numbers.
From Three’s point of view, the company is reacting to changes already underway in the market, including the acquisition of the UK’s largest mobile operator, EE, by the major fixed-line broadband provider BT. That transaction prompted concerns about market concentration, voiced by several industry players. Larger rivals such as Vodafone, which hold both mobile and fixed-line operations and have a larger subscriber base, have also expressed worry about the shifting competitive landscape.
Representatives from Sky, Virgin Media, TalkTalk, Vodafone and BT are listed to attend the European Commission meeting; France’s Iliad may also participate. If regulators approve the merger, the combined company would almost certainly face significant conditions, potentially including the divestment of spectrum or other structural remedies.
In advance of the hearing, Hutchison has intensified its effort to win regulatory approval by offering concessions, including a pledge to freeze retail prices for five years. The proposed combined company also promises to invest £5 billion in the UK network over the next five years—about 20 percent more than the companies say they would have invested separately—and to create conditions that help “other meaningful competitors” enter the UK market using the enhanced network.
The core regulatory concern is reduced competition, which represents the merger’s greatest obstacle. Hutchison argues that the planned increase in network investment will boost competition, but UK telecoms regulator Ofcom’s chief executive Sharon White has emphasized that the UK market needs four mobile network operators to remain competitive. European Competition Commissioner Margrethe Vestager has taken a similar stance in the past, citing the need to preserve the number of national mobile players when she blocked a proposed merger in Denmark last year.
How should the European Commission decide on the proposed merger? Share your view in the comments.