EC launches in-depth investigation into planned merger of Three UK and O2 UK

2 Nov 2015

An in-depth investigation into the proposed purchase of UK mobile network operator O2 UK by rival Hutchison 3G UK (Three UK) has been opened by the European Commission (EC), with a view to assessing whether the deal will harm competition. The EC said it had concerns that the merger of the two cellcos could lead to higher prices, less choice and reduced innovation, with Commissioner Margrethe Vestager, in charge of competition policy, cited as saying: ‘With this investigation we want to ensure that consumers in the UK do not pay higher prices or face less choice as a result of this proposed takeover.’

Following an initial market investigation the EC raised a number of concerns, the first of which was that with O2 UK and Three UK currently competing against one another in the retail mobile sector, the deal could ‘remove an important competitive force and … the merged entity would have limited incentives to exercise significant competitive pressure on the remaining competitors’. Additionally, it was thought the deal could reduce the number of network operators that are effectively willing to host MVNOs; with prospective and existing MVNOs having less choice of host networks this would mean weaker negotiating power to obtain favourable wholesale access terms. The final concern was that the reduction in the number of competitors following the merger would risk leading to ‘a weakening of competitive pressure and increased likelihood that network operators will coordinate their competitive behaviour and increase prices on a sustainable basis on the retail and wholesale markets’.

The EC will now consider the transaction in-depth, to determine whether its competition concerns are confirmed. The Commission has 90 working days, until 16 March 2016, to make a decision on the matter.

United Kingdom, CK Hutchison (formerly Hutchison Whampoa), Hutchison 3G UK (Three UK), O2 UK, Telefonica