CK Hutchison bullish on O2 UK merger clearance, as EC's Vestager investigates

CK Hutchison said it remained confident of gaining clearance for its proposed acquisition of O2 UK from Telefonica, despite the European Commission opening an in-depth investigation into the planned deal.

In a statement e-mailed to FierceWireless:Europe, the telecoms group said it continued to believe that combining its Three UK business with Telefonica's O2 UK would be a good move for consumers in the market, and that it was confident the view would be backed by the EC.

"The Commission's decision to open an in-depth investigation was widely expected in the context of the Commission's previous approach to in-country telecoms mergers," the company stated, adding that it is "confident that the acquisition will be approved".

CK Hutchison said it held "open and constructive discussions with the Commission throughout the first phase of the merger review process," and pledged to maintain that approach during the formal investigation.

The EC's decision to conduct an in-depth probe of the proposed acquisition appears to end the hopes of the UK's Competition and Markets Authority (CMA) to be allowed to evaluate the transaction. The CMA sought control of the investigation in early October, arguing that it was better placed to judge the impact of the deal because it is also evaluating BT's plan to acquire mobile operator EE.

Margrethe Vestager, the EC's competition Commissioner, said the in-depth probe is necessary "to ensure that consumers in the UK do not pay higher prices or face less choice as a result of this proposed takeover."

The EC is concerned that the merger of Three UK and O2 UK would reduce competition while resulting in higher consumer prices and a lowering of the merged entity's incentive to invest in network upgrades. The move could also make it harder for MVNOs to negotiate favourable wholesale access terms by reducing their choice of host networks, the Commission stated.

CK Hutchison and Telefonica will discover the outcome of the EC's probe on Mar. 16, 2016.

While the EC noted that the opening of an in-depth probe does not prejudge the outcome of the investigation, recent evidence points to a tougher stance by Vestager to deals that reduce the number of operators in a market from four to three.

A planned merger of TeliaSonera and Telenor's Danish businesses is the most high-profile casualty of that harder stance: the operators ditched their plan after it became clear that the EC would not approve it.

For more:
- see this EC announcement

Related articles:
BT wins provisional approval for EE acquisition
Mallinson: O2 UK/Three UK, BT/EE mergers show devil is in the details on consolidation benefits
EC's Ansip sides with Vestager on telecoms M&A
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

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