CK Hutchison has not been able to convince European Union antitrust regulators that its deal to buy O2 UK will be of benefit to the market, with reports saying the proposed £10.25 billion (€12.8 billion/$14.5 billion) transaction is expected to be formally blocked within weeks.
Although the Hong Kong-based company has put forward a number of remedies to appease the European Commission (EC), including the sale of network capacity to virtual operators, sources told Bloomberg that the only acceptable solution would be if Hutchison agreed to sell part of the merged entity's infrastructure to a new rival in order to retain a fourth mobile network operator (MNO).
This is certainly the preferred solution of UK regulators Ofcom and the Competition and Markets Authority (CMA). In a letter sent last week to EC competition commissioner Margrethe Vestager, CMA CEO Alex Chisholm said the 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."
For its part, Hutchison described the sale of Three UK or O2 to a new MNO to gain approval for the merger as a "red herring", and said there was "no taker for such a remedy."
Bloomberg said the company planned to challenge any move by the EC to block the deal. The commission has until May 19 to make its decision, but an earlier ruling is regarded as likely.
The news agency said Hutchison is now focusing on its plan to buy Wind in Italy and merge it with Three Italy. Like the proposed UK deal, the transaction would create a larger mobile player and reduce the number of MNOs from four to three. However, this deal is also undergoing an in-depth investigation by the EC.
Although it has approved similar deals in the past, such as in Austria (where Hutchison acquired Orange Austria), Ireland (where Hutchison bought O2 Ireland) and Germany (where Telefónica Deutschland acquired E-Plus), the EC has taken an increasingly critical stance in recent months because it believes remedies such as allowing more MVNOs into the market have not been effective.
For more:
- see this Bloomberg article
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