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Ofcom boss calls on EC to block Three/O2 merger

James Pearce
February 1, 2016

Sharon White claimed Three’s £10.25 billion bid to buy its rival could lead to a price hike for consumers

Ofcom has urged European regulators to block Three’s proposed takeover of O2 amidst fears it will lead to sky high mobile bills in the UK.

In a column in the Financial Times, Ofcom CEO Sharon White warned that the £10.25 billion merger could harm competition, as the number of operators in the UK falls from four to three.

White outlined several key issues in a submission to European Commission, which is due to release its initial views on the proposed merger.

White’s submission is another blow to Three-owner CK Hutchison, which is looking to acquire O2 and combine the assets to make the UK’s largest mobile provider with around 34 million customers.

Ofcom chief executive Sharon White
Ofcom chief executive Sharon White

“This is not a broken market,” White said, according to the FT. “Last year, UK mobile firms generated £15 billion of revenue. Competition, not consolidation, has driven investment.”

Three concerns

She outlined three main concerns around the merger: higher prices for consumers and businesses; disruption to the existing UK network arrangements between Three and EE, and Vodafone and O2; and a “shift in the balance of power” between independent retailers and the mobile operators.

White said: “We are concerned that the smallest mobile network, Three, proposes to become the biggest by acquiring its rival O2.

“Many of our concerns relate to competition between operators who own the networks on which mobile phones rely. Only these four companies can make your mobile signal faster, more reliable and widely available. Establishing a new mobile network might be one answer, but this would take time, and considerable investment.

“While the merger is reviewed, Ofcom will keep working to promote healthy rivalry between operators. We want UK consumers and businesses to enjoy fair mobile pries and cutting-edge products for years to come. For that we need strong competition: the basis of protection and the incentive to progress.”

Three response

Her words came as BT sealed it’s £12.5 billion acquisition of EE following approval from the Competition and Markets Authority, which took evidence from Ofcom.

It also came just days after Three announced a price hike that angered some customers, with some seeing their bills rise by between £15 to £30 per month.

A Three spokesperson said: “Three UK’s acquisition of O2 will provide the smallest operator with the scale and financial strength to be able to continue to compete aggressively in the market as a focused, pure-play mobile operator against powerful fixed and media convergent operators.

“The combined business will significantly enhance the wholesale market, offering access to a best-in-market network and enabling a range of better and stronger offers by a range of other providers for consumers.”

White’s view was hailed as “a relief” by consumer rights watchdog, who warned of the impact a merger could have on MVNOs running off O2 and Three’s networks.

Editor-in-chief Hannah Maundrell said: “If we’re left with just three major networks running the mobile show it’ll inevitably mean we pay more to talk, text and tap into the net from our phones; that’s hardly taking the telecoms sector forward.

“Fierce competition between networks and a strong regulatory stance are what’s needed to keep the telecoms sector speeding forward and address the major problems many of us still have with our mobiles. Sorting signal issues in rural parts of the UK is just one important project that could be put on ice if the merger goes ahead.

“It’s not just O2 and Three customers that would be impacted; a number of different brands piggyback off their networks, many of these – like GiffGaff – offer really competitive deals. If the takeover gets the go-ahead and these agreements aren’t continued our choice could get a whole lot narrower and our bills a lot more expensive.

“I hope Ofcom put their foot down to protect the pockets of the 93 per cent of us that use a mobile phone.”

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