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Three UK joins public spat over O2 acquisition

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The Chairman of Three UK has issued a public retort to Ofcom and made three promises in a bid to convince Europe to allow the acquisition of O2 UK.

Canning Fok, Group Co-MD of CK Hutchison Holdings and Chairman of Three UK took exception to Ofcom chief Sharon White’s persistent public lobbying against Hutch’s proposed acquisition of O2 UK and decide to retaliate with a public letter.

“Readers in Britain must have been bemused by the blizzard of commentary and speculation earlier this week around telecoms competition in the UK,” said Fok. “We might be forgiven for wondering why Sharon White, the new CEO of Britain’s telecom regulator Ofcom, felt the pressing need to go public with her conclusions about the effects of CK Hutchison’s proposed acquisition of O2 without having asked for or heard our views in response to her concerns.”

Fok proceeded with the standard narrative about what a model corporate citizen Three UK is, how the customer always comes first, and how he’s just looking for a fighting chance against BT and Vodafone. He then made three public promises in a further bid to seduce the EC.

  1. Three+O2 will not raise the price for consumers of a voice minute, a text or a megabyte in the 5 years following the merger
  2. Three+O2 will invest £5 Billion in their UK businesses over the next 5 years
  3. Three+O2 will offer to sell fractional shared ownership interests in its network capacity

These promises were presumably designed to anticipate the sort of conditions Europe is likely to impose as a condition of clearing the move, and on the surface they do seem to have substance, but not everyone is impressed.

On a media call to cover his company’s latest quarterly numbers Vodafone CEO Vittorio Colao scoffed at the first promise, saying “I wish I had a price freeze.” His point was that the underlying trend is for prices to decline so any promise not to raise them is somewhat disingenuous.

The reason for all this public bickering is the anticipated imminent announcement of a statement of objections from the EC, which has the potential to scupper the deal.

“The onus will fall on CK Hutchison to propose satisfactory remedies to allay the Commission’s concerns,” said Kester Mann of CCS Insight. “Today’s announcement is the first step, but it is unlikely to appease competition chief Margrethe Vestager, who has adopted a hard-line on in-market mergers.

“More likely, CK Hutchison will need to facilitate the entrance of a new player to retain the status quo of four national network providers. As such, its pledge around selling slices of network capacity will be the most heavily scrutinised.

“Sky or Virgin could be among the winners if Three is required to sell network or spectrum assets, enabling either or both to offer more fully-fledged mobile services as part of a wider push into multiplay.”

Assuming Europe doesn’t block the move outright, the key issue will be the net gain to Hutch after it’s done things like selling off capacity and helping start a new MNO. BTEE and Vodafone are likely to derive initial pleasure from watching Three+O2 jump through hoops, but if the result is an aggressive new MNO entrant that drives down prices for everyone they may eventually wish Hutch had been given an easier ride.


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