CMA calls for EC to block O2/Three merger or force mobile network sell-off
Written by: Sam Fenwick | Published:

The Competition and Markets Authority (CMA) has called on the European Commission to either block the proposed merger between O2 and Three or require the combined company to sell off one of its mobile networks to ensure that the UK market is still served by four mobile network operators (MNOs).

“We believe this merger would give rise to a significant impediment to effective competition in retail and wholesale mobile telecoms markets in the United Kingdom,” said Alex Chisholm, the CMA’s chief executive, in a letter to commissioner Margrethe Vestager, European Commission.

Chisholm also said that: “The proposed remedies are materially deficient as they will not lead to the creation of a fourth Mobile Network Operator (MNO) capable of competing effectively and in the long-term with the remaining three MNOs such that it would stem the loss of competition caused by the merger."

“The only appropriate remedy that would meet the criteria that the Commission is bound to apply… is the divestment – to an appropriate buyer approved by the Commission – of either the Three or O2 mobile network businesses, in entirety, or possibly allowing for limited ‘carve-outs’ from the divested business. The divestment would need to include the mobile network infrastructure and sufficient spectrum to ensure a commercially viable fourth MNO in the UK. Absent such structural remedies, the only option available to the Commission is prohibition."

“The CMA urges the Commission to act to prevent the long-term damage to the UK mobile telecoms market, and therefore to the interests of UK consumers, that both of our authorities have predicted will result from this merger,” Chisholm concluded.

Sharon White, Ofcom’s chief executive, noted back in February that should the merger go ahead, the confirmed firm would control more than four in 10 mobile connections in the UK. She also highlighted Ofcom research that found that “average prices [are] around 10-20 per cent lower in markets with four operators and a ‘disruptive’ player” compared with markets with only three MNOs.

Canning Fok, Three UK’s Chairman, has promised that the combined company, would not “raise the price for consumers of a voice minute, a text or a megabyte in the five years following the merger”. He also promised that it would invest £5 billion over the next five years and “enable other meaningful competitors in the UK market to offer services on a completely level playing field by offering for sale fractional shared ownership interests in our network capacity".

The provisional deadline for the EC’s decision is 19 May.

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