Europe expected to veto Three/O2 merger, Hutch to challenge

There is a growing consensus that European competition authorities will soon formally veto the proposed merger of MNOs Three and O2 in the UK.

The European Commission started an investigation back in October of last year with an initial deadline of 16 March 2016 to make a decision. That deadline has slipped several times since then, rendering the whole concept of a deadline redundant, but the feeling seems to be that a decision is close to being made.

The FT reported last week that Brussels is close to a veto, perhaps persuaded by the clamour from UK authorities not formally included in the process. The Telegraph heard that Hutchison is already preparing a legal challenge in anticipation of the negative decision, while Bloomberg reports this morning that the negative decision is imminent and that Hutchison is already refocusing on a similar deal in Italy, which the EC is also taking a look at.

Despite the approval of the BTEE deal this probable decision coincides with a general hardening of attitudes in Brussels towards telco consolidation. While it argues otherwise, there seems to be a reluctance to allow the number of MNOs to fall below four in larger markets. This may have been a factor in the collapse of the Orange/Bouygues talks, as it’s hard to see how the EC could have approved that after blocking the Three/O2 deal.