After BT acquired the UK’s largest network, EE, all eyes have been focused on whether CK Hutchison (owner of Three UK) would be allowed to buy O2 from Spain’s Telefonica. The question has been answered, and while it isn’t good news for the companies involved, it could be some welcome news for UK consumers. The European Commission has ruled against allowing the deal on the grounds that it would have reduced customer choice and likely seen prices increase.
As part of the proposed deal that was worth around £10.3 billion, CK Hutchison had promised to freeze prices for five years on both O2 and Three networks in the UK, as well as providing network access to a couple of MVNOs (MVNOs are companies such as GiffGaff that piggyback off the main network providers). It also promised to sell off O2’s stake in Tesco Mobile, as well as a wholesale deal with Virgin Media. Three had also promised billions of pounds worth of investment in the UK’s digital infrastructure.
The EU Commission wasn’t convinced that the concessions offered by Three would have been enough in the long term, and Commissioner Margrethe Vestager, in charge of competition policy, had this to say about the issue:
“We want the mobile telecoms sector to be competitive, so that consumers can enjoy innovative mobile services at fair prices and high network quality. The goal of EU merger control is to ensure that tie-ups do not weaken competition at the expense of consumers and businesses.
Basically, if the merger had been allowed to go ahead, the UK consumer would have been reduced to being able to choose between just 3 major network providers, Three/O2, Vodafone, and EE. Competitive prices would have been even harder to come by, and the EU was also worried it would have “hampered innovation and the development of network infrastructure in the UK, which is a serious concern especially for fast moving markets.” That last part has some bearing on the future roll-out of 5G in the UK.
The reduced number of major networks means that could have also meant that there would also be a reduction in the number of MVNOs being hosted, leaving the MVNOs to offer less competitive prices.
While the EU deciding anything is a hot topic at the moment in the UK, what do you think of the decision?