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Competition watchdog wants to investigate Three/O2 merger

Monday, October 5th 2015 by Ellen Branagh

The UK’s competition watchdog wants to investigate the planned merger of Three and O2 amid concerns it will “significantly” affect competition in the mobile market.

The Competition and Markets Authority (CMA) has made a request to the European Commission (EC) that it should refer the proposed takeover of Telefonica Europe, which owns O2’s UK business, by Three owner CK Hutchison Holdings Ltd to the CMA for investigation.

The CMA said it should investigate the potential merger because any impact on competition will affect UK consumers.

The authority said: “The Competition and Markets Authority’s (CMA) initial view, following consultation and preliminary analysis, is that the transaction threatens to affect significantly competition in the UK retail mobile and wholesale mobile markets.

"It also believes it is appropriate for the case to be referred to the CMA for investigation because any impact on competition resulting from the merger will likely be limited to UK consumers and because of the CMA’s experience in investigating telecoms mergers – as demonstrated by the CMA’s ongoing investigation into the BT/EE merger in this market.”

The CMA said given the links between the two cases, it would be more efficient to also look at the Three/O2 merger to avoid duplication.

Mergers that fall within the jurisdiction of the EU Merger Regulation can, in some circumstances, be referred to the UK to be looked at by the CMA.

In this case, the CMA is asking the European Commission to refer the acquisition of O2 by Three to it under provisions of Article 9 of the EU Merger Regulation.

The decision on whether or not to refer the case must be taken by the commission by 30 October.

In January, both companies confirmed that Hutchison Whampoa, which owns Three, had entered into exclusive talks with Telefonica about a potential acquisition of the company’s O2 UK business.

'Making mobile better'

It is no surprise that the deal has attracted regulatory attention, as a merger will see Three become the UK’s largest mobile network, with 41% of the market share ahead of EE’s 32% and Vodafone’s 24%.

In a statement at the time, O2 said: “Three is known for campaigning on behalf of its customers, much like O2.

“We are confident that an agreement will mutually benefit the customers of both companies, as well as drive better value, quality and investment in one of the most digitally competitive countries in the world.”

A statement on Three’s website said: “Any acquisition is likely to be a lengthy process. It’s business as usual at Three. We remain focussed on making mobile better for consumers in the UK.

“We are confident that if final agreement is reached it will benefit the customers of both companies.”

The CMA is currently carrying out an in-depth investigation into the planned buyout of mobile network EE by telecoms giant BT.

The competitions watchdog fast-tracked the proposed £12.5bn acquisition of the UK's biggest mobile network to an “in-depth phase 2 investigation” because it threatens to reduce competition in both the fixed broadband and mobile markets.

BT's buyout of EE would make it the UK’s largest fixed line and mobile provider, sparking concerns from rivals that it will reduce competition.

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