Ofcom CEO warns of higher prices if Three UK/O2 UK merger is cleared

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Ofcom CEO Sharon White cast doubt on CK Hutchison and Telefónica's plan to merge their UK mobile operations due to concerns the deal could result in higher prices for consumers.

White said the planned merger of Three UK and O2 UK could lessen competition among the country's mobile operators and, in turn, see the cost of services increase. The Ofcom chief said infrequent mobile users including the elderly could be particularly hard hit by any increase in consumer fees because mobile operators already offer the best deals to heavy users and make up the difference through extra charges on less regular users, the Daily Mail reported.

At the heart of White's concern is the fact that a merger of Three UK with O2 UK would reduce the number of full mobile network operators (MNOs) from four to three. The CEO noted that consumer prices have risen in other European markets where such reductions in MNO numbers have happened, and said that competition is a better driver of low consumer prices than consolidation, the Daily Mail stated.

The newspaper reported that an average UK household could see its annual mobile bill rise from £532.44 (€721.86/$787.21) in 2014 to £612.34 in the next two years if the deal were to be approved, based on the experience of Austrian consumers who saw average prices rise by 15 per cent following Three Austria's acquisition of Orange Austria.

Ofcom in December put a planned auction of frequencies in the 2.3 GHz and 3.4 GHz bands on ice after Telefónica UK and Hutchison 3G UK threatened to take legal action if the regulator commenced the auction while the European Commission was still deliberating over their planned merger.

The Commission opened an in-depth probe into the effects of the planned merger on competition in October, and is scheduled to announce its decision on whether to approve or block the plan by mid-April.

CK Hutchison in November told FierceWireless:Europe that it was confident the UK merger would be approved, and that the company had held "open and constructive discussions" with the EC in the initial phases of its investigation.

In 2015 the EC demonstrated a harder line on mergers that reduce the number of full MNOs from four to three. The tougher stance ultimately resulted in Telenor and TeliaSonera abandoning a planned merger of their Danish operations, and cast doubt on the Three UK and O2 UK deal as well as a similar deal involving Three Italy and Wind.

For more:
- see this Daily Mail report

Related articles:
Ofcom delays spectrum auction following O2/Three legal threat
CK Hutchison bullish on O2 UK merger clearance, as EC's Vestager investigates
UK asks to take over Three/O2 review, as Vestager cautions against 4 becoming 3
Analysts: Telenor, TeliaSonera's Danish dilemma could impact similar deals in UK and Italy
European Commission takes a tough line on MNO consolidation - Year in Review