Block the O2 and Three mega merger

UK competition bosses send a warning to Europe

THE UK competition watchdog has joined the chorus of opposition to the £10.3bn tieup of Three and O2 after its boss urged Brussels to block the deal.

Alex Chisholm, chief executive of the Competition and Markets Authority, outlined his ‘serious concerns’ to Margrethe Vestager, the head of the European Commission, who is deciding whether to approve the mobile phone merger.

O2 and Three combined would become the largest mobile firm in the UK, with a customer base of 31m, reducing the number of mobile networks from four down to three. In his letter Chisholm warned such a move would be a ‘significant impediment to effective competition.’

He said: ‘The CMA urges the Commission to act to prevent the long-term damage to the UK mobile telecoms market, and therefore to the interests of UK consumers, that both of our authorities have predicted will result from this merger.’

Three’s owner, CK Hutchison, has offered a raft of concessions in a bid to get the deal waved through. These include selling up to 40pc of space on its network to Sky and Virgin Media for £3bn, offering to sell a 20pc stake in Three and pledging to run O2 as a separate company.

Canning Fok, boss of Hutchison, has promised Three would invest £5bn in Britain’s mobile industry, and freeze prices for consumers until 2021, as well as offering cheaper tariffs for pensioners. But Chisholm said these remedies ‘fall well short’ of what would be needed to protect competition.

He said the only way for the deal to be approved is if one of the businesses is separated off, either ‘in entirety’ or by carving out certain operations.

Chisholm’s comments echo criticisms made by Ofcom’s chief executive Sharon White, as well as Rich- ard Lloyd, director of consumer organisation Which?, who have both opposed the deal. Lloyd said: ‘The CMA is right that this merger, if it is allowed to go ahead, would seriously reduce choice and competition for UK customers in the mobile market. Which? has also written to the European Commission to set out our concerns. Fewer players in a market rarely leads to better outcomes for consumers.’

Virgin Media’s boss Tom Mockridge hit back at the CMA, though, and criticised it for causing a dearth of competition after approving an earlier merger between mobile phone operator EE with telecoms giant BT.

Mockridge claimed BT/EE now owns 45pc of the total network capacity, known as spectrum, in the UK, including 60pc of the fast 4G internet capacity.

He said: ‘In comparison Vodafone has 28pc of UK spectrum, O2 has 15pc, and Three has 12pc. This is the very reason it is now difficult to create a new, fourth mobile network operator.

‘A combined O2/Three would provide a counter balance to the strength of BT/EE, offering an alternative source of capacity to other providers who will drive com- petition in their own right.’ Hutchison said it was ‘very disappointed’ by the CMA’s letter, which it described as an ‘entirely onesided argument designed to support a preordained outcome’.

It described the CMA’s letter as ‘astonishing’ and argued it can have ‘ no legitimate status in the merger control process’.

The final deadline for the European Commission to make its decision on the merger between Three and O2 is May 15.