CMA Wants To Investigate £10.25bn O2-Three Merger

The Competitions and Markets Authority (CMA) has asked the European Commission (EC) for power to investigate the proposed merger of Three and O2 by Hutchison Whampoa.

The Taiwanese firm agreed a £10.25bn takeover of O2 with its current owner Telefonica earlier this year and formally applied for EU approval on September 11.

The CMA says it wants to look into the deal because it is likely to “significantly” affect competition in the UK retail and mobile wholesale market. The authority is also investigating the BT-EE merger and wants to be able to look at both mergers concurrently to see what impact they will have.

Read More: Will Three Still ‘Make It Right’ After O2 Merger?

CMA Three O2 investigation

“Given the clear links between these 2 cases it would be more efficient to also examine the merger between Three and O2, in particular to avoid duplication and fragmentation,” said the CMA in a statement. “The CMA also received support from industry participants in making the request.”

Consolidation is a current trend of the European communications market and although the EC has given its blessing to a number of other merges in recent times, most notably in Ireland where Three and O2 were granted approval to merge on the condition that two Mobile Virtual Network Operators (MVNOs) to launch on the combined network, there are signs the Commission is hardening its stance.

Last month, Telenor and TeliaSonera abandoned plans to merge their respective Danish operations after failing to gain European approval.

The two companies were unable to ease Commissioner Margrethe Vestager’s concerns that reducing the number of Danish operators from four to three would harm competition and could not agree on conditions that would allow the merger to go ahead. A merger between O2 and Three would also reduce the number of UK operators from four to three.

Hutchison is likely to argue that both operators need the deal to be completed to compete with BT-EE and Vodafone, but it has been suggested the transaction will face an “extensive” investigation because of spectrum and network infrastructure sharing implications.

“We note that the Competition and Markets Authority (CMA) has submitted an Article 9 request to the European Commission to seek referral to the UK of CK Hutchison’s proposed acquisition of O2 UK,” Hutchison told TechWeekEurope. “The request by the CMA was expected following their recent consultation.

“The review of the transaction falls under the jurisdiction of the European Commission.  The decision whether to grant the request is a matter for the Commission.  Over the past years the Commission has retained its jurisdiction in the review of mobile mergers in several countries.

“We have had open and constructive discussions with both the European Commission and the relevant authorities in the UK over several months. We remain confident that the proposed acquisition will be cleared.”

Regulator Ofcom says it is currently happy with the quality of service and competition in the mobile market, but says it will take a keen eye on the pending mergers and trend towards convergence taking place in the sector.

“Ofcom doesn’t have direct role [in regulating the transactions] but we work closely with Competition and Market Authority (CMA) and the European Commission (EC),” Brian Potterill, competition policy director at Ofcom told a Westminster eForum in August.

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