O2 – Three Deal to Face European Probe.
The New Year isn’t quite kicking off like O2 would have hoped it might, as news has emerged that Brussels will investigate four key areas of their planned merger with Three in the UK. The proposed £10.5 billion takeover of O2 by CK Hutchison will now be investigated for collusion, in regards to wholesale costs, to handset sales and network ownership.
Europe’s antitrust watchdog has serious fears that the deal will reduce effective competition for customers and end up as a raw deal for third-party mobile providers that depend upon the two networks. Those third party networks include the likes of ID, Giff Gaff and Virgin Mobile, to name just some. A survey has been sent out to companies in the telecoms sector, designed to raise evidence on areas of particular concern to the regulatory body. This news follows the regulators decision to launch an in depth ‘phase 2’ investigation of the deal.
As the number of mobile network takeovers increases, the O2-Three deal is seen as one of the key battlegrounds for the future of the mobile industry, as it would reduce the number of operational UK networks from four to three. The commission’s position on four being the minimum recommended number for effective competition has hardened further under Margrethe Vestager, who raised strong objections to a similar takeover in Denmark, which was subsequently dropped.
This document focuses in on four main areas: sales channels, retail competition, infrastructure and wholesale services. The commission will then judge what steps need to be put in place before the deal can go ahead, ensuring that competition will not be affected. Of course there is the possibility that they conclude that there’s no version of the deal that can go ahead, or at least no deal that CK Hutchison would find acceptable.
Meanwhile, events like BT’s already waved-through purchase of EE will also affect the telecommunications landscape in the UK, as the biggest combined TV, broadband, home phone and Infrastructure Company takes over the UK’s largest network. That deal was waved through because it didn’t affect the number of actively competing mobile networks in the UK, keeping the number at four.
A large part of the survey is dedicated to questions for network providers who rely on wholesale access to either Three or O2s network, something that CK Hutchison are seen to be keen to make changes on. As such, companies that were sent the questionnaire were asked to estimate the effects of a 5% rise in wholesale costs, as well as the impact on average retail prices if those costs were passed down to consumers. Needless to say, customers would vent their frustrations on the 0844 800 3125 contact number for O2 if that were the case.
The commission will take up to April to investigate the effects of the deal, though the amount of scrutiny the deal has already seen, alongside the European commission’s history in regards of competition reduction, it wouldn’t come as a surprise if the deal were never to see the light of day.