Ofcom Logo, Image Credit media.ofcom.org.uk
Regulators and competition authorities are scrutinising two telecom deals that will change the face of the UK telecoms industry if they go through.
The first deal will see BT buying EE for a whopping £12.5 billion that will extend the telecom giant’s reach into mobiles. From BT’s perspective, this deal will be good for consumers because it will allow them to access all of their telecoms and media services from one place. BT also claims that the merger will unlock significant investment that the companies would not be able to make independently.
The second deal could see Hong Kong’s Hutchinson Whampoa, owner of the Three network, buy larger rival O2 for £10.5 billion in a move that will see them surpass EE to become the UK’s largest mobile provider.
The two deals are being assessed by different regulators. The deal that could see BT taking over EE is being investigated by Britain’s Competition and Markets Authority, while the deal that could see the merger of Three and O2 will be investigated by the European Commission. However, telecoms regulator Ofcom will have significant influence in both cases. Ofcom’s recently appointed Chief Executive Sharon White will be responsible for the regulator’s recommendations. Appearing before MPs on the Culture, Media and Sport Committee, she stated that: “As firms start to want to offer a multitude of services, it is understandable there is a move to consolidate, and so the issue for the competition authority is what is the impact on the consumer – particularly when you get one mobile company purchasing another mobile company?”
With regards to the BT deal, she stated that: “the packaging of content and pipework into one bundle could be a great offer for the consumer but it could also make for a more sticky market”. This could mean that, with fewer options, customers are likely to switch providers less often. The end result of this could be a “less-good deal for consumers”.
Ultimately, there are fears that these deals could lead to less transparency and prices rising for consumers. With regards to the BT deal, there are concerns that more complicated bundles on offer will make it harder for consumers to assess whether they are receiving a good deal, thus resulting in a lack of transparency. Critics also suggest that consumers who only take out basic packages may see their prices rise, to fund the deals of those who take all their services with the company. It is likely that this would disproportionately affect older customers, who tend to take out just basic internet and home phone services.
Rival companies argue that BT will have a dominant position, due to the network of cables it leases to peers to carry their internet. This adds yet another layer to the BT Openreach debate, which is currently under consultation with Ofcom as part of its 10 year review. Competitors have pushed for Ofcom to break up BT and Openreach, as they claim that BT is too dominant and favours its own customers through its Openreach service. This is disputed by BT, which claims that Openreach is run at arm’s length and that all companies are treated the same.
Critics fear that prices may rise as a result of less competition in the market. Currently, there are four major mobile phone networks: O2, EE, Vodafone and Three. The Three-O2 deal would see this reduce to three networks, which could result in less choice for consumers. Analysts point out that prices have tended to rise, elsewhere in Europe, when the number of mobile operators has reduced.
The head of TalkTalk Dido Harding has been one of the most vocal opponents of the two deals. In an interview with the Daily Mail, she warned of the dangers of the deals going through unchallenged, stating that: “you will wake up in 10 years’ time, and we won’t have choice and prices really will have gone up, and not by a bit, that they will have gone up very fundamentally”