BT objects to Cellnex UK towers buy

BT is not at all happy about Cellnex’s planned acquisition of CK Hutchison’s telecoms towers in the UK, claiming that the move would impact on market competition.

The UK incumbent has submitted a response to the Competition and Markets Authority’s (CMA’s) investigation into the likely €1 billion-plus transaction, noting that should the deal go ahead it would affect its and its rivals’ access to macro mobile sites and could well lead to higher prices.

The statement from BT is significant at this stage because it’s the first serious move we have seen designed to prevent the deal from going ahead. The CMA’s decision to ratchet up its investigation into the proposed deal this summer gave us an inkling that all might not run smoothly for the parties involved, and BT’s statement adds further fuel to that fire.

To recap, CK Hutchison, owner of the Three branded mobile operations in Europe, agreed a €10 billion deal to sell its mobile towers in six countries – around 24,600 sites in total, rising to 30,000, including some yet to be deployed – to passive infrastructure specialist Cellnex in November last year. The deal was structured on a market-by-market basis, although we don’t know the price tags for the individual markets, and the first four closed relatively quickly in the first half of this year.

Italy proved to be something of a sticking point, with regulators there raising serious concerns about Cellnex’s potential for market dominance on picking up Three Italia’s towers, particularly in light of the recent towers merger between TIM and Vodafone. However, Cellnex made some concessions, including agreeing to make certain sites available to newly-licensed mobile operators and fixed wireless players at market conditions, and the Autorità Garante della Concorrenza e del Mercato (AGCM) was sufficiently appeased to green light the takeover. As such, Cellnex was able to close the Italy segment of the deal almost three months ago.

That seemed to bode well for the UK, but there are a couple of key differences between the two markets that could have a big impact on the CMA’s decision.

Firstly, in Italy the competition concerns came primarily from the competition watchdog, which was worried about smaller mobile operators struggling to gain access to the sites they required. In the UK a major market player has waded in, which adds an additional layer to proceedings. In addition, the some of the towers involved in the deal are wrapped up in a joint venture initiative, known as MBNL, with BT. Cellnex and CK Hutchison insist the JV will be unaffected, but BT insists that the merger would adversely impact its ability to use MBNL to roll out 5G services.

Its other objections centre on the market power Cellnex would have in the UK should the merger go ahead. It notes that deal would “materially enlarge” Cellnex’s already significant market share in macro cell sites; prevent smaller competitors from building scale of their own; and “inevitably lead to higher prices for the services offered by Cellnex to BT and other UK wireless operators,” as well as lowering service levels.

“BT agrees with the CMA’s conclusion that the merger gives rise to a realistic prospect of a substantial lessening of competition and welcomes the decision to refer the merger for a Phase 2 investigation,” the telco said.

It seems more likely that the authorities will impose conditions on the transaction rather than block it altogether, and doubtless Cellnex has prepared for such an eventuality. But there’s more of this story to come before it reaches a conclusion.