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Hutchison left “disappointed” by CMA’s merger letter

James Pearce
April 11, 2016

The CMA detailed its opposition to the Three-owner’s £10.25bn takeover of O2 in a letter to European Commissioner Margrethe Vestager

Three-owner CK Hutchison has said it was left disappointed by the Competition and Markets Authority’s decision to send a letter opposing its acquisition of O2.

Though the Hong Kong-based giant said it was not surprised by the CMA’s stance on its proposed £10.25 billion acquisition from Telefonica, it claimed the letter offered “no analysis or argument” as to why Hutchison’s proposed remedies are “insufficient.”

In order to drive through the buyout, the Three-owner has secured commitments from Sky, Virgin, Tesco and UK Broadband to take up more than 40 per cent of its combined Three/O2 network capacity.

CK Hutchison has also committed to invest a further £5 billion in its network, and guaranteed not to increase prices for Three UK customers for the next five years if the deal is improved.

The CMA claims these commitments do not go far enough to protect customers from potential price rises, and challenged the EC to force Hutchison to divest either Three or O2, or stop the deal.

“It is no surprise that CMA opposes the merger. It always has, and so has Ofcom. But it is for the Commission to assess any competition concerns, on the basis of the facts  and proposed remedies.

“The CMA letter claims that the creation of a fourth full-fledged network operator is the only possible solution to address competition concerns. But no analysis or argument is given to support this, nor why Hutchison’s proposed remedies are insufficient. It is an entirely one-sided argument designed to support a preordained outcome.

“The remedies proposed by Hutchison go far beyond remedies accepted in previous mobile merger cases by the Commission.”

BT Behemoth

Hutchison also pointed to the recent £12.5 billion acquisition of EE by BT, which was backed by both Ofcom and the CMA, as an “interesting contrast.” BT completed the purchase of the UK’s biggest mobile provider in January after the CMA approved the buyout without any remedies, despite widespread industry opposition.

Hutchison added: “It is interesting to contrast the content of the letter with the attitude of the CMA (when it was the decision maker) and Ofcom in the BT-EE CMA merger clearance, which was approved without conditions or remedies, creating a dominant fixed-mobile behemoth in the UK market.

“We are confident that the Commission will exercise its legal obligation to review the case on its merits and take into account the impact of the plans of the remedy takers and new market entrants on competition and pricing in the UK mobile market.”

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