CMA raises ‘serious concerns’ with Three UK/O2 UK merger plans

12 Apr 2016

The UK’s Competition and Markets Authority (CMA) has sent a letter to the European Commission (EC) expressing its ‘serious concerns’ over the proposed acquisition of British cellco O2 UK by CK Hutchison, parent of rival Three UK.

In a copy of the letter published on its website, the CMA stated: ‘We believe this merger would give rise to a significant impediment to effective competition in retail and wholesale mobile telecoms markets in the United Kingdom.’ Alongside detailing its worries about the planned tie-up, the antitrust regulator notably suggested that, in its view, the ‘only appropriate remedy’ which would ensure the EC has eliminated any competition worries is the divestment of the network business belonging to either O2 UK or Three UK in its in entirety to an appropriate buyer approved by the Commission. Failing that, the CMA has argued that a limited ‘carve-out’ from the divested business could also prove a workable remedy, though such a divestment would, it argued, need to include the mobile network infrastructure and sufficient spectrum to ensure a commercially viable fourth mobile network operator (MNO) in the UK. Making clear its objection to the tie-up should neither of these solutions be pursued, the CMA said: ‘Absent such structural remedies, the only option available to the [EC] is prohibition.’

Unsurprisingly, CK Hutchison was quick to respond to the submission from the CMA to the EC, with Total Telecom reporting the Hong Kong-based outfit as saying in a statement on the matter: ‘The divestiture of [Three UK] or O2 to a new MNO to gain approval of the merger is a red herring … There is no taker for such a remedy. It would also undermine the whole economic rationale of the merger and reinforce the spectrum inferiority and capacity constraints of both companies.’

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