Virgin Media CEO lends support to O2/Three UK deal

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CK Hutchison's plan to buy O2 UK from Telefonica and merge it with Three UK has received support from a somewhat unexpected ally: the CEO of Virgin Media, Tom Mockridge.

In a statement, Mockridge said any competition concerns could be addressed without blocking the proposed O2-Three transaction, noting that the European Commission (EC) has previously cleared mobile mergers that led to a reduction in the number of mobile players from four to three, "subject to wholesale remedies".

"The same can be true in the UK. A combined O2-Three could have more to offer consumers and, crucially, more capacity for other providers who want to drive competition in their own right. With the right remedies, this deal could stimulate not curb competition," said Mockridge.

Of course, the "wholesale remedies" mentioned by the CEO in many cases refer to arrangements with Virgin Mobile's parent company, Liberty Global, which has launched MVNOs in both Austria and Ireland, where mergers have taken place.

Mockridge's comments put him on a collision course with Sharon White, the CEO of Ofcom, and Vodafone CEO Vittorio Colao.

White came out strongly against the proposed deal this week and called on the EC to block the deal. She expressed concern that a combined Three/O2 would increase mobile prices, and that the merger would disrupt existing UK networks arrangements, whereby Three and EE use one network and O2 UK and Vodafone UK use another.

"This works well," said White. "The four companies are still effective retail competitors, who compete independently on coverage and quality. Any merger would threaten that arrangement."

CK Hutchison co-managing director Canning Fok, who is also chairman of Three UK, was clearly far from impressed by the Ofcom CEO's comments.

"We might be forgiven for wondering why Sharon White, the new CEO of Britain's telecom regulator Ofcom, felt the pressing need to go public with her conclusions about the effects of CK Hutchison's proposed acquisition of O2 without having asked for or heard our views in response to her concerns," Fok said in a letter published by CK Hutchison.

"Now let me make one thing clear: the combination of Three (the smallest operator in the market) with O2 makes us able to stand up to the new Leviathan BT (in the blunt words of Dido Harding, chief executive of TalkTalk, earlier this week), not to mention to the old top-of-the-heap predator Vodafone and is the only way we can guarantee that five years from now customers will still be getting more and paying less for mobile services," Fok said.

To back up this guarantee, Hutchison promised a price freeze on mobile services for five years, said it would invest £5 billion (€6.4 billion/$7.2 billion) in the combined business over the same period and pledged to sell off some of its network capacity to allow other competitors to enter the market.

Such promises failed to impress Vodafone's CEO. According to the Telegraph, Colao said the wording of Hutchison's prize-freeze promise was "interesting". He noted that the company has said it won't increase prices per gigabyte, adding: "On this measure nobody is increasing prices."

For more:
- see the Virgin Media CEO statement
- see the letter from Canning Fok
- see this Telegraph article

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