UK says Cellnex/CK Hutchison towers deal threatens competition

The UK’s competition watchdog is proposing to take its investigation into Cellnex’s planned acquisition of CK Hutchison’s towers to the next level unless they can give it a good reason not to.

The Competition and Markets Authority (CMA) late on Thursday announced that its phase one investigation into the deal has raised competition concerns. Specifically, the proposed transaction could have an impact on the independent supply of passive infrastructure assets in the country, it said.

Cellnex brokered a high-profile €10 billion deal to acquire all of CK Hutchison’s UK towers assets late last year. The deal is structured on a market-by-market basis and the UK is only remaining portion of the transaction still not completed. The Italian segment of the deal was the last to close a couple of weeks ago. That’s significant because Italian authorities were also concerned about the impact on competition and sought certain concessions from Cellnex before the deal got the green light.

Italy’s Autorità Garante della Concorrenza e del Mercato (AGCM) pointed in particular to Cellnex’s Italia’s 70% share of the market for third-party hosting, and as such it enacted a number of conditions, such as requiring Cellnex to make available a certain number of sites in municipalities of fewer that 35,000 inhabitants to new mobile operators and fixed wireless access providers at market conditions.

We could be looking at something similar in the UK.

The CMA did not provide figures, but noted that “Cellnex is already, by some distance, the largest independent supplier of mobile towers in the UK,” having acquired around 7,400 sites, plus the right to market a further 900, from Arqiva for £2 billion last year.

“The CMA is concerned that its purchase of the large number of assets owned by Three would further strengthen its position in this market,” the watchdog said. CK Hutchison owns UK mobile operator Three.

“It’s important that services provided to mobile networks remain competitive so that the millions of businesses and consumers across the UK that use mobile phones can enjoy lower prices,” said Mike Walker, Chief Economic Adviser at the CMA. “Cellnex is already the largest independent supplier of mobile towers in the UK. We’re concerned that this deal could help to lock in this position and prevent the emergence of new direct competition.”

The CMA has given Cellnex and CK Hutchison five working days to offer legally binding proposals to address its competition concerns. It will then take a further five days to decide whether to accept any proposals or refer the case to a Phase 2 investigation.

Presumably, the CMA is expecting the parties to make a proposal like that agreed in Italy, including some sort of price regulation pledge.

But there is also a hint from the watchdog that it would prefer that this deal did not go ahead at all, so CK Hutchison and Cellnex probably can’t count on having any pro-competition efforts accepted.

“In its initial analysis, the CMA found evidence to suggest that CK Hutchison, when considering how to monetise its passive infrastructure assets, could have sold these to an alternative buyer rather than existing market leader Cellnex. This would have increased the competition that Cellnex faces at present,” it said, reiterating its stance that the loss of competition could see mobile operators face higher prices or lower quality services, with a knock-on effect for mobile customers.

If the CMA thinks there is another, less anti-competitive, deal to be done in the UK passive infrastructure market, it may well play hardball on this one.