(Image Credit: gail)
In February, BT revealed a proposed £12 billion plan to acquire EE, the country’s largest mobile network operator. The proposed merger sparked debate over whether it would reduce competition in the UK telecommunications market. Today the deal cleared its most significant regulatory hurdle after receiving approval from the Competition & Markets Authority (CMA).
In a 15-page provisional report, the CMA assessed the potential effects of the merger across mobile, fixed-line, and broadband markets. The regulator concluded that the transaction is “not expected to result in a substantial lessening of competition in any market in the UK.”
BT has been offering mobile services on a small scale through an MVNO arrangement that uses EE’s network, but the CMA judged the market impact of that arrangement to be limited. The full merger of EE and BT, however, could reshape the market in more significant ways.
The UK has been deprived of network investment for years
EE currently holds the largest share of spectrum in the UK. Through the merger, BT would gain access to that spectrum alongside its existing allocations, a shift that has raised concerns among competitors. Speaking to the Financial Times, Vodafone’s chief executive warned that the combined spectrum holdings could edge BT toward a dominant position and urged regulators to consider requiring the merged company to relinquish some spectrum.
Beyond spectrum, the merged operator would be able to leverage BT’s extensive fixed-line infrastructure to provide network backbone capacity. Rival operators have requested that the CMA require BT to allow access to its so-called “dark fibre” network under regulated terms. Enforced access and cost controls would aim to prevent the merged entity from using its infrastructure advantage to disadvantage competitors.
“We provisionally think that the retail mobile market in the UK, with four main mobile providers and a substantial number of smaller operators, is competitive. As BT is a smaller operator in mobile, it is unlikely that the merger will have a significant effect on competition,” said John Wotton, Inquiry Chair. “By the same token, it is unlikely that the merger will have a significant effect on competition in the retail broadband market, where EE is only a minor player.”
Vodafone raised the concern of this leading to a BT monopoly in the UK
Of ten “areas of concern” the CMA identified in July, nine were resolved with unanimous findings that the merger would not reduce competition. The CMA remained less certain about one area: the potential impact on smaller mobile virtual network operators (MVNOs).
Mark Soden, Managing Director at Norman Broadbent, said: “Rather than focusing on unlikely market dominance, the industry should instead be celebrating and encouraging the potential improvements to product innovation. The UK has been deprived of network investment for years, and market consolidation is the only way to improve service levels and ultimately, competitiveness.”
Separately, Hutchison Whampoa-owned Three UK has proposed a £10.25 billion acquisition of O2, a deal currently under regulatory review. If approved, that transaction would reduce the number of major mobile network operators in the UK to three. Proponents argue the Three–O2 deal may be necessary for those operators to remain competitive, given their relatively smaller subscriber bases and spectrum holdings.
The CMA plans to publish the full report later this week. A provisional summary of the CMA’s findings is available from official sources.
Do you think a merger between EE and BT would be good for the market? Let us know in the comments.