Ofcom keen for EC to block O2, Three merger

1 Feb 2016

British communications regulator Ofcom has urged European authorities to block the proposed merger of mobile network operators O2 UK and Three UK amid concerns that the tie-up could prompt a rise in bills for consumers. A report by the Financial Times cites Ofcom chief executive Sharon White as also suggesting that the merger could impact on rival high-street retailers and upset existing network arrangements.

With the European Commission (EC) expected to comment on the GBP10.5 billion (USD14.9 billion) merger deal this week, Ofcom has submitted its arguments to that body. The British watchdog is said to have conducted research which analysed mobile prices over recent years in 25 countries, in which it found that average prices were up to a fifth lower in markets with four operators compared with those with only three established networks. As such, although the creation of a fourth mobile network operator to replace O2 UK ‘might be one answer’ to such concerns, according to White, this would take ‘time and considerable investment’.

A forthcoming statement of objections is set to be sent shortly to the companies involved in the deal – reflecting a number of issues raised by Ofcom – which will then be required to find a way to ease such worries. Among the possible solutions, Three UK owner CK Hutchison is anticipated to argue that the best solution to bolster competition would be by agreeing to allow rival companies such as Sky, TalkTalk and Virgin Media to utilise a fixed slice of its network to create a more fully fledged mobile business. Meanwhile, following reports last week that French billionaire Xavier Niel could be interested in entering the UK market, Ofcom head Sharon White is sceptical about the benefits of this as a solution given ‘many of [the] concerns relate to competition between operators who own the networks on which mobile phones rely’.

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