Warning that Three’s proposed acquisition of rival O2 is likely to lead to higher monthly bills and fewer competitive choices for British wireless consumers, Sharon White, the chief executive of British telecom market regulator Ofcom, affirmed this week that she has asked the European Commission (EC) to block the £10.5 billion (US$15.5 billion) transaction. A unit of Hutchison Whampoa of Hong Kong, Three currently ranks as the smallest of the four British national wireless carriers. Announced in March 2015, the proposed union of Three and O2, the British wireless subsidiary of Telefonica, would catapult the merged entity to the top of the British wireless market while reducing the number of national competitors from four to three.
Last October, the EC (with the support of the United Kingdom Competition and Markets Authority) launched a formal, in-depth investigation into the O2-Three merger. Voicing concern about the impact of the proposed deal on the number of national competitors in the British market, White maintained that “only . . . four companies can make your mobile signal faster, more reliable and widely available.” Because the transaction could tip the balance of power “between mobile networks and the independent retailers who help constrain the price of mobile handsets and bills,” White also cautioned that the deal “could mean higher prices for consumers and businesses.” While acknowledging that remedies such as divestitures or an agreement by the parties to grant network access to rivals could assuage these concerns, White further stipulated that “many of our concerns relate to competition between operators who own the networks on which mobile phones rely.”
Meanwhile, in a letter to the Financial Times, Hutchison co-managing director Canning Fok affirmed plans by the merged entity to freeze mobile phone rates for affected UK customers for a five-year period following merger approval. To further ease regulatory concerns, Fok also said the merged entity will offer “fractional shared ownership interests in our network capacity” to competitors. Declaring that the combination of Three and O2 “makes us able to stand up to the new leviathan BT,” which recently re-entered the British wireless market through its purchase of Everything Everywhere, Fok defended the merger as “the only way we can guarantee that, five years from now, customers will still be getting more and paying less for mobile services.”