Image Credit: www.knowyourmobile.com
In March last year Asia’s Hutchinson Whampoa owned Three UK, agreed terms to buy O2 from the German owned Telefonica. Such a deal would see the UK’s largest mobile network operator created and many are not happy about this. Go back a few years and the UK had five major network providers; 3, O2, Orange, T-Mobile & Vodafone. Orange and T-Mobile merged forming the company EE which has since merged with BT to become a communications giant here in the UK. If the 3 O2 merger goes through, it will leave only 3 major network operators in the UK.
For this reason, the proposed merger has been under major scrutiny since it was announced last year and has not been able to go through until an EU antitrust investigation has been conducted. A decision on the merger from the EU commission will be made by the 19th of May. In the mean time the Competition and Markets Authority in the UK has voiced concerns over the lack of competition that would remain in the UK mobile market.
Ahead of the decision Alex Chisholm of the CMA has written to Margaret Vestager of the European Commission. They stress that if the merger is allowed to go ahead it could ‘cause long term damage, to consumers here in the UK. They feel that the lack of competition would ultimately result in higher prices or sub standard services.
Not everyone is of the same opinion however. 3, O2, Virgin Media, Tesco Mobile and Sky feel this would be a good move. If the proposed merger between O2 and 3 goes ahead they will have the largest portion of the available spectrum which will be a huge advantage to MVNO’s such as Tesco Mobile and Virgin who could piggy back off of this new network, opening up further possibilities for MVNO’s.
Three have suggested a number of remedies to the EU commission to try and ensure the deal goes through, the CMA however feel that these remedies fall far short of what would be acceptable in order for the merger to go through. They feel that the only acceptable solution, should the deal go through, would be for the majority of one of the networks to be sold off after the deal to ensure 4 major networks remain.
Ultimately the decision is not up to the CMA or Ofcom, the decision will be made out of the UK entirely and rests in the hands of Margaret Vestager and the EU Commission, who have in the past allowed similar deals to go through. Mergers that saw the main network operators fall from four to three have already been accepted in Ireland, Germany and Austria. It will be interesting to see how this deal pans out in the coming month, will it be accepted without limitation, blocked entirely or allowed to go through with certain restrictions? There’s a lot of money riding on this deal with three expected to pay anywhere up to £10.25 billion for the acquisition of O2.