No to O2; EC blocks CK Hutchison’s purchase of British cellco

12 May 2016

A proposed acquisition of British mobile network operator O2 UK by CK Hutchison, owner of rival cellco Three UK, has been blocked by the European Commission (EC) under the EU Merger Regulation. In a press release confirming the decision the EC noted its ruling had been reached over ‘strong concerns that UK mobile customers would have had less choice and paid higher prices as a result of the takeover’, while it also argued that the deal would have harmed innovation in the nation’s mobile sector.

Following an in-depth investigation of the proposed deal the EC cited three specific concerns: that less competition in the sector would lead to higher prices and reduced choice and quality for consumers; that the future development of the entire UK mobile network infrastructure could be hampered; and that there would be a reduced number of mobile network operators effectively willing to host virtual operators. Remedies proposed by CK Hutchison had not adequately addressed these concerns, with the EC arguing they did not resolve the structural problems created by the disruption to current network sharing agreements and they were not capable of replacing the weakened competition in the retail and wholesale mobile telecoms markets that would result from the takeover.

Commenting on the decision, European Commissioner for Competition Margrethe Vestager said: ‘Allowing Hutchison to take over O2 at the terms they proposed would have been bad for UK consumers and bad for the UK mobile sector. We had strong concerns that consumers would have had less choice finding a mobile package that suits their needs and paid more than without the deal. It would also have hampered innovation and the development of network infrastructure in the UK, which is a serious concern especially for fast moving markets. The remedies offered by Hutchison were not sufficient to prevent this.’

In response to the EC’s ruling CK Hutchison issued a statement saying it was ‘deeply disappointed’, while confirming it would study the decision in detail with a view to considering its options, including the possibility of a legal challenge. ‘We strongly believe that the merger would have brought major benefits to the UK, not only by unlocking GBP10 billion (USD14.4 billion) of private sector investment in the UK’s digital infrastructure but also by addressing the country’s coverage issues, enhancing network capacity, speeds and price competition for consumers and businesses across the country and dealing with the competition issues arising from the current significant imbalance in spectrum ownership between the UK’s MNOs,’ the Hong Kong-based company said of the matter.

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