Officials of Hong Kong’s Hutchison Whampoa confirmed that they are considering legal action in the wake of the European Commission’s decision Wednesday to block the proposed merger of Three—Hutchison’s wireless unit in the United Kingdom (UK)—with British wireless rival O2. Respectively, Three and O2, the British wireless operation of Telefonica, rank as the fourth- and second-largest mobile carriers in the UK. Announced in March 2015, the proposed US$15.1 billion union of Three and O2 would have catapulted the combined entity to the top of the British wireless market while reducing the number of national competitors from four to three. In addition to representing the EC’s first formal ruling against a telecommunications-related merger in a major European market, Wednesday’s decision also highlights a shift in EC policy under the leadership of EC Competition Commissioner Margethe Vestager who, in contrast to her predecessor Joaquín Almunia, has pursued a tougher approach to mergers that reduce the number of competitors in a national market.
Notwithstanding the parties’ claim that a merger would provide the scale they need to compete more effectively against market leader Everything Everywhere (which was acquired by British Telecom last year), the EC decreed that the deal would have “removed an important competitor” in the UK wireless market while resulting in higher prices and less choice for British wireless subscribers. In an attempt to allay competitive concerns, Hutchison had offered a raft of concessions that included a five-year freeze on mobile phone rates, US$7.22 billion in network investments, and a pledge to open 45% of the combined entity’s network capacity to rivals. However, as she stressed that “allowing Hutchison to take over O2 at the terms they proposed would have been bad for UK consumers and bad for the UK mobile sector,” Vestager maintained that, “the remedies offered by Hutchison were not sufficient.” Declaring, “we are deeply disappointed,” a Hutchison spokesman told reporters: “we will study the commission’s decision in detail and will be considering our options, including the possibility of a legal challenge.”