Margrethe Vestager – Photo EC
(BRUSSELS) – The European Commission blocked the proposed acquisition of O2 by Hutchison under the EU Merger Regulation Wednesday. It says the merger would have led to less choice and higher prices for UK mobile customers.
The decision follows an in-depth investigation by the Commission of the deal – worth some EUR 13 bn – which would have combined Telefonica UK’s ‘O2’ and Hutchison 3G UK’s ‘Three’, thus, according to the Commission, creating a new market leader in the UK mobile market.
In her statement, Commissioner Margrethe Vestager said the takeover would have removed an important competitor, and would have left only two mobile network operators, Vodafone and BT’s Everything Everywhere (EE), to challenge the merged entity.
The significantly reduced competition in the market would likely have resulted in higher prices for mobile services in the UK and less choice for consumers than without the deal.
She also said the takeover would likely have had a negative impact on quality of service for UK consumers by hampering the development of mobile network infrastructure in the UK.
Finally, the takeover would have reduced the number of mobile network operators willing to host other mobile operators on their networks, says the Commission.
While Hutchison had proposed remedies, the Commission says these “failed to adequately address the serious concerns raised by the takeover.”
This was a good decision for UK consumers, said Ms Vestager: “Allowing Hutchison to takeover 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.”
UK mobile telecoms market
The UK mobile market is currently competitive retail mobile prices are among the lowest in the entire EU. The UK is also one of the most advanced countries in the EU in terms of roll-out of 4G technology and take-up of 4G services.
There are currently four mobile network operators in the UK BT’s mobile business EE, Telefonica’s O2, Vodafone and Hutchisons Three. Based on its investigation the Commission had strong concerns that the combination of Three and O2 would have led to a reduction in terms of choice and to higher prices and lower quality services for UK consumers than without the deal.
The Commission’s approach to merger reviews in mobile telecoms markets
The objective of EU merger control is to make sure that mergers in the European Union do not weaken competition. In mobile telecoms markets, effective competition ensures fair prices, quality networks and spurs innovation.
While telecoms regulations and spectrum allocation are national affairs, the Commission assesses each case by itself and on its own merits.
If competition concerns are identified, the parties can propose remedies, which must address the Commission’s concerns in full.
