The Competition and Markets Authority (CMA) has provisionally cleared the merger of telecoms giants BT and EE, saying the move will not damage competitiveness in the industry.
The inquiry looked into the effects of the merger on five different areas within the telecommunications industry: retail mobile, wholesale mobile, mobile backhaul, wholesale broadband and retail broadband. In all but one area they unanimously agreed that the merger would not have any substantial effect on competition. When it came to the wholesale mobile industry, the inquiry found themselves more split on the issue.
The wholesale mobile industry refers predominately to MVNOs such as Giffgaff, Virgin Mobile, or until recently Mobile by Sainsbury’s. The inquiry were evenly divided over whether the merger would harm MVNOs, resulting in higher prices or poorer service, but under the law two-thirds of the inquiry would have needed to agree in order for a substantial lessening of competition (or SLC) to be found. Prior to the provisional agreement, MVNO TalkTalk were one of the most vocal in opposition of the merger, stating: ‘TalkTalk considers that the proposed merger of BT and EE will significantly lessen competition in the market for wholesale MVNO agreements. The merger will reduce the number of active MVNO wholesalers from two to one, and would thereby make it difficult, or in some cases potentially impossible, for firms wishing to enter into an MVNO agreement in order to provide bundled products including both fixed-line and mobile access.’ There is no doubt that TalkTalk and other providers will submit a response to the provisional decision in the upcoming weeks.
Chair of the inquiry, John Wotton, said in the announcement: ‘We recognise that this is a merger which is important to many consumers and businesses. We have heard a number of concerns from competitors. After a detailed investigation, our provisional view is that these concerns will not translate into a competition problem in practice.
We provisionally think that the retail mobile market in the UK, with 4 main mobile providers and a substantial number of smaller operators, is competitive. As BT is a smaller operator in mobile, it is unlikely that the merger will have a significant effect on competition. By the same token, it is unlikely that the merger will have a significant effect on competition in the retail broadband market, where EE is only a minor player.
We have also been looking at the ways in which, as a merged company, BT/EE might try to disadvantage competitors which it supplied with services such as backhaul, wholesale mobile or wholesale broadband services. We have provisionally found that in some areas it is unlikely that they would have both the ability and incentive to do so – and in others that the effects of their attempting to do so would be limited.’
Following the announcement the CMA said they were moving the deadline for their final decision back to the 18th of January in order to consider responses to the provisional decision today. Even with the decision being only provisional, BT Group plc. saw a rather sharp increase in stock prices overnight.