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CMA boss Alex Chisholm opposes Three's O2 bid

UPDATE: After BT's EE takeover gets the go ahead, its rivals face a more challenging reception.

by Jack Torrance
Last Updated: 11 Apr 2016

UPDATE: There’s that terrifying moment in every wedding when the officiator asks if anyone has reason to object. The words ‘speak now or forever hold your peace’ are always followed by a tense silence. For betrothed couple Three and O2, there have now been two such unwanted interruptions. Competition and Markets Authority (CMA) boss Alex Chisholm has given his ‘serious concerns’ about the merger, adding his voice to Ofcom’s Sharon White, whose objections are reported below in a story originally published on February 1.  

The merger could create a ‘significant impediment to effective competition’ in the UK telecoms market, Chisholm said in a letter to European Commissioner Margrethe Vestager, who will decide the matter in May.

Though Three and O2 offered ‘remedies’ to Vestager’s earlier statement of objections (even the 'vicar' has a problem - this isn't looking good), Chisholm said they fell well short of what was required. Without a significant divestment to allow for a viable fourth operator, he said, ‘the only option available to the Commission is prohibition.’ That’s at least two people off the would-be newlyweds’ Christmas card list then. 

FROM FEBRUARY 1: This time last year it looked as though Britain’s mobile phone market was set for some massive changes. Three owner Hutchison Whampoa had announced plans to glug down O2 and merge the two networks together and broadband giant BT agreed a bumper £12.5bn deal to buy EE.

But while the latter tie-up was given the go-ahead by regulators earlier this month, Hutchison’s drawn-out courtship of O2 could still come to nothing. The deal is currently being reviewed by the European Commission, which could block the deal if it has concerns about the impact on competition.

Today the case for such an intervention was strengthened by the words of Sharon White, boss of UK communications regulator Ofcom. Writing in the FT this morning, White said that the current market wasn’t ‘broken’ and that ‘the deal could mean higher prices for consumers and businesses.’ In Austria, where a similar deal was completed recently, mobile prices have gone up by 15-30% as a result. Which seems like a pretty compelling argument.

The O2/Three deal is a very different beast to that of BT/EE. While EE did have a small number of broadband customers, BT’s mobile business was a minnow of little significance. Three is significantly smaller than its three largest rivals, but its combination with O2 would reduce the number of operators with their own network of masts from four to three.

But the deal has got the backing of Sky, which said Three’s ownership could boost investment in the network. The TV and broadband giant is starting its own ‘mobile virtual network’, which will be carried by O2’s infrastructure, so that doesn’t come as much of a surprise. ‘It’s important that it’s a good network,’ Sky’s chief strategy officer Mai Fyfield told the Telegraph today. ‘And I think under Three’s ownership we would me more confident that the direction of O2 would be clear.’

Additional reporting by Adam Gale

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