Hutchison says sale of Three or O2 to new MNO is a 'red herring'

CK Hutchison lost no time in responding to an open letter written by the CEO of the UK Competition and Markets Authority (CMA) that clearly opposed the company's plan to buy O2 UK, describing the proposed remedy of selling Three UK or O2 to a new MNO to gain approval for the merger as a "red herring".

"There is no taker for such a remedy," the Hong Kong-based company wrote in comments emailed to FierceWireless:Europe. "It would also undermine the whole economic rationale of the merger and reinforce the spectrum inferiority and capacity constraints of both companies."

The company added that it has commitments with Sky, Virgin, Tesco and UK Broadband to take up over 40 per cent of combined network capacity to drive competition in the UK mobile market.

"It is astonishing that [the] CMA has failed to refer to this, and has not assessed the impact of entry of such large, committed players on the competitive landscape," it remarked.

In his letter this week to the European commissioner for competition, Margrethe Vestager, CMA CEO Alex Chisholm said that the European Commission (EC) should block the merger if it cannot be guaranteed that a fourth MNO would be maintained through the sale of the Three or O2 mobile network businesses "in entirety, or possibly allowing for limited 'carve-outs' from the divested business."

The CMA chief echoed previous comments by Ofcom CEO Sharon White that a reduction in the number of mobile network operators (MNOs) from four to three would have a harmful effect on competition in the UK mobile services market.

CK Hutchison was robust in its rejection of such claims, and pointed out that the CMA has no legitimate status in the merger control process. It also hinted at double standards in the CMA and Ofcom's stance:

"It is interesting to contrast the content of the letter with the attitude of the CMA (when it was the decision maker) and Ofcom in the BT-EE CMA merger clearance, which was approved without conditions or remedies, creating a dominant fixed-mobile behemoth in the UK market," the company said.

In his latest column for FW:E, industry expert and analyst Keith Mallinson also noted that the decision on whether or not the proposed merger of O2 and Three should be allowed has become very political, and said "the run up to the Brexit referendum [scheduled for Jun. 23] is a particularly delicate time for the UK to appear to be in any contention with Brussels."

"Are these announcements by Ofcom and the CMA public displays of emerging consensus or are there significant differences of opinion between these UK agencies and Brussels?" questioned Mallinson.

CK Hutchison entered into an agreement with Telefónica in March last year to acquire O2 UK for a total of £10.25 billion (€12.7 billion/$14.5 billion). The EC has set a provisional deadline of May 19 for a decision on the proposed merger.

Related articles:
Mallinson: Brexit referendum affects EC decision on proposed Three/O2 UK merger
UK regulator calls on EC to maintain 4 operators or block Three/O2 merger
EC opens in-depth investigation into Hutchison's planned Wind Italy deal
Three UK could stay separate from O2 UK as Hutchison mulls plan B
Hutch offers up 30% of UK network, as regulators sharpen knives over pricing

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