Ofcom CEO calls on Brussels to block planned O2/Three merger

Ofcom CEO Sharon White said the merger of Three UK with O2 UK threatens to drive up mobile prices for consumers, and has asked the European Commission to block the proposed deal.

Writing in the Financial Times, White noted that a combined Three/O2 would control "more than four in 10 mobile connections" and said the merger would also 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."

In answer to those that say consolidation is required to help operators to increase revenues and therefore fund network investment, White insisted that the UK "is not a broken market.

"Last year, UK mobile companies generated £15 billion [€19.7 billion/$21.4 billion] of revenue," she said.

The Ofcom CEO, who has reportedly met with the EC's competition commissioner Margrethe Vestager to discuss the issue, said the regulator's arguments have now been submitted to the Commission, which is reviewing the proposed merger.

The EC is expected to issue a statement of objections to the merger very soon, and is not expected to be favourable towards the idea of reducing the number of mobile network operators in the market from four to three. For example, Three UK could be told to sell off some of its network capacity before buying O2.

Analysts from Jefferies International in January said that CK Hutchison used a London investor meeting to advocate strongly its view that its proposed mergers in the UK and Italy would repair weak mobile operators and should therefore be considered pro-competition.

Telefonica agreed last March to sell its O2 UK business to CK Hutchison for £10.25 billion, comprising an initial payment of £9.25 billion and an additional £1 billion to be paid once the combined business achieves a pre-determined cash flow.

For more:
- see this Financial Times article
- see Sharon White's FT article

Related articles:
Xavier Niel: Leaving no stone unturned
Mixed reactions to BT/EE as Three/O2 faces a battle ahead
Report: O2 and Three set to face tough EC conditions for UK merger
Ofcom CEO warns of higher prices if Three UK/O2 UK merger is cleared
European Commission takes a tough line on MNO consolidation- Year in Review

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