CK Hutchison seeks to calm fears over post-merger network sharing deals

CK Hutchison stepped up efforts to convince regulators and rivals that its plan to buy O2 UK and merge it with Three UK will not have a detrimental impact on existing mobile network-sharing arrangements between the market's current four players.

According to a report in the Financial Times, the Hong Kong-based company will promise to work with rivals to maintain the two networks -- one of which is shared by O2 UK and Vodafone UK and the other by EE and Three UK.

Ofcom CEO Sharon White has raised concerns that a merger of O2 and Three would upset the balance of these arrangements. The European Commission (EC) is ultimately responsible for approving the proposed £10.25 billion (€13 billion/$14.8 billion) deal, and is understood to have already sent a statement of objections to CK Hutchison.

Three UK CEO David Dyson told the FT that the group was in talks with its network-sharing partners and would also seek to allay regulatory concerns that a reduction in the number of operators from four to three would cause mobile prices to rise. The FT noted that Three wants to maintain the existing network-sharing arrangements and would seek to partner with Vodafone and EE.

The proposed Three/O2 merger has received support from other quarters: the CEO of Virgin Media, Tom Mockridge, said recently that any competition concerns could be addressed without blocking the proposed O2-Three transaction, noting that the 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".

Sky UK and France's Iliad are also reported to be interested in exploiting any prospective merger "remedies" that could see Hutchison forced to sell off some of its mobile infrastructure to secure approval of the deal.

CK Hutchison has already promised a price freeze on mobile services for five years and said it would invest £5 billion in the combined business over the same period. It also pledged to sell off some of its network capacity to allow other competitors to enter the market.

Analyst Keith Mallinson, who is also a columnist for FierceWireless:Europe, wrote recently that the Three/O2 merger could produce a dynamic marketplace, and warned that "interventionists" such as the EC and Ofcom are failing to recognise the new and expanding ways that innovation and competition may occur.

For more:
- see this Financial Times article (sub. req.)
- see this separate FT article (sub. req.)

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