EC launches in-depth probe into Hutchison's O2UK takeover

The European Commission says it has opened an ‘in-depth’ investigation into the proposed acquisition of Telefónica UK by Hutchison. It will study whether the consolidation could be interpreted as harming competition, as defined under EU Merger Regulations.

The EC investigation comes three weeks after Ofcom boss Sharon White indicated she was not in favour of an O2/3 merger and has issues with the proposed BT/EE deal.

The Telefonica takeover could lead to higher prices, less choice and less innovation for mobile customers in the UK, according to Margrethe Vestager, the Commissioner in charge of competition policy. “We want to ensure that consumers in the UK do not pay higher prices or face less choice as a result of this proposed takeover,” said Vestager.

Merging Telefónica UK with Hutchison subsidiary Three UK would combine the UK’s second and fourth largest mobile network operators (MNOs) and make them into the UK’s largest MNO.

Now there will be a full investigation into three initial concerns. Firstly, it’s feared the merger would remove an important competitive force, leading to higher prices and less investment in networks. Secondly, there would be few MNOs likely to host mobile virtual network operators (MVNOs) and the wholesale market would become less accessible. Thirdly, the consolidation and lack of competition may lead to an oligarchy where price fixing and sustained high prices were more likely to occur.

The transaction was notified to the Commission on 11 September 2015 and now has 90 working days, until 16 March 2016, to take a decision on whether the existing parties are close competitors, whether the market incentives will still be faced in the new merged entity and the potential reaction of its competitors.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review, said the EC in a statement.

In October Ofcom boss Sharon White said consolidation only serves the public good when operators are unable to adequately invest without it, a situation she does not see in the UK, with operators maintaining healthy cashflow margins.

“We continue to believe that four operators is a competitive number that has delivered good results for consumers and sustainable returns for companies,” she said. “If the current merger wave continues, there are risks to consumers and businesses who have enjoyed one of the most competitive markets of recent years.”