Three seeks spectrum restrictions on BT and Vodafone

Three UK CEO David Dyson has stated restrictions should be placed on BT and Vodafone in the next mobile spectrum auction, to encourage the growth of challenger brands and competition in the UK telco market.

Speaking to the Financial Times, Dyson outlined his concerns over the power and reach BT has within the British telco market, which he believes leaves competition in an unhealthy position. While BT and Vodafone account for a respective 42% and 28% of the mobile spectrum, only 15% is used by Three after Europe’s competition commissioner blocked the Hutchison Whampoa subsidiary’s attempts to acquire O2, and its 14% share.

“The combination of BT and EE is incredibly strong financially. It has got the financial ability to outcompete everyone in the market in how much they are willing to pay,” he said. “Potentially, given how much spectrum they are already sitting on, BT is incentivised to strategically bid in the next auction to restrict the other operators in the market from increasing their spectrum portfolio. That could make life difficult.”

Dyson’s concerns focus on the fear that BT would bid in future auctions not to bolster its own capabilities, but as a means to keep competition at arm’s length. Ofcom is still considering how to design the next auction though it has stated it prefers a market with four mobile operators to protect the consumer’s interests. Dyson now believes BT and Vodafone should be restricted in the next auctions, to encourage the growth of challenger brands and ultimately competition.

Dayson confirmed it will not make a move into the multi-play market, instead focusing on improving its mobile services, and in particular its provision of data-heavy tariffs to drive towards its ambitions of being the ‘best mobile-only operator in the UK’.

Three as a subsidiary has reportedly been under pressure in recent months to increase its competitiveness in the UK market under the threat of CK Hutchison removing its support of the business. The blocked acquisition of O2, which would have given Three an additional 24 million customers, apparently brought about a rethink of the brand’s position in the UK market by CK Hutchison executives in Hong Kong.

The future of the brand has seemingly been secured, but according to Dyson the market is still in need of change to ensure a fair and valued proposition for the UK consumer. “Ofcom wants credible operators. But to be credible you need enough spectrum,” he said, pointing to rising prices and patchy mobile coverage as evidence that the market is not working as well as it could.

“Hopefully Ofcom will make some pro-competition choices in the design of the auction and ideally starts to rebalance the distortion,” he added. “The UK has the most unbalanced spectrum ownership of all the countries in Europe. We need competitive restraints to stop the imbalance getting worse.”