Boss who thinks less choice will push down prices

BRITISH consumers will soon have far less choice if David Dyson has his way. Dyson, 45, is the mobile phone boss who is seeking to convince competition czars in Brussels that if the UK goes the way of much of the rest of Europe and cuts the number of mobile phone operators from four to three it will actually be better for all of us.

Never mind the fact that if his Hong Kong controlled mobile service Three is combined with 02, it will create a communications colossus with 31m customers and the ability to set prices rather than continue the fight as a nimbler, lower cost challenger.

In many ways Dyson is an unlikely telecoms tycoon. He began his commercial life as an auditor at KPMG.

But he cultivates the look of the offthe-shelf media executive replete with designer stubble and fashionable open neck shirt. As might be expected of a numbers person turned techie, he is at his most enthusiastic when talking about gadgets.

‘The iPad is a brilliant tool and I am just trying out Samsung’s latest virtual reality goggles.’

When we meet on an elegant terrace of the upmarket Renaissance Hotel at Marylebone in Central London there is a real sense of frustration about the way in which the regulatory process had gone since the £10.3bn telecoms deal was unveiled almost 12 months ago.

‘It has been travelling along at a fairly pedestrian pace as far as I am concerned,’ says Dyson.

What really gets his goat is that while his proposed deal is being examined in granular detail by the European Commission, forcing him to come up with all kinds of potential fixes to satisfy concerns, the BT takeover of EE was nodded through by the UK’s Competition and Markets Authority with barely a whimper.

‘It created a goliath of a company with £24bn of turnover, huge assets – mobile, WiFi and broadband. Once BT made the move to buy EE it was the catalyst for us to say the market is shifting quite dramatically and unless we do something we are going to be left behind,’ he argues.

DYSON’S frustration is easy to understand and it is ridiculous that the two biggest UK telecoms deals of the decade should be examined by different competition authorities in London and Brussels. But it also shows that when companies are faced with competition from a behemoth the inclination is to create their own giant irrespective on the long-term implications for consumer choice and service.

He does, however, have a point. Before EE was bought by BT – which controls almost all the UK’s telecoms and broadband infrastructure – it already was the largest mobile provider in the UK with 25m customers.

The second largest was 02 (once part of BT) with 21m-22m customers, followed by Vodafone, Britain’s mobile phone pioneer, with around 20m. Three with just 9m accounts was the industry laggard. Contrary to most economic and market theories, Dyson is seeking to demonstrate that fewer players in the market is better than many.

It is a hard case to make at a time when challenger grocers, banks, fashion retailers and no-frills airlines have helped to bring prices down and improve customer experience in the markets in which they operate. Not surprisingly, perhaps, given the struggle that Three is having with the European Commission, Dyson has not yet been frightened into thinking that Brexit would be a disaster for his company or Britain.

‘No’ he answers emphatically when asked if he has a fear of leaving the EU. ‘Not from a business or personal perspective.’ If he had been asked (which he wasn’t) to sign a letter underlying the harm likely to be done by leaving the EU, the Three chief executive would have desisted.

Britain’s communications regulator Ofcom has concerns about a Three-O2 merger. It has pointed to the Austrian experience arguing that after the number of players in the market came down, prices rose.

Dyson concedes that they ‘did go up’ but suggests it has nothing to do with mergers and more to do with the auction of new spectrum – essentially a mobile phone signal – by the Vienna authorities.

‘I think a couple of the operators said they would try and recover some of the financial costs through higher prices, but they never actually put prices up,’ he claims.

He accepts, however, that where the number of mobile companies have come down – in Germany, Ireland and in Austria – the remedies sought by regulators seek to make sure ‘they can be comfortable that prices won’t go up post merger’.

In seeking to swing opinion of the public, City and regulators Dyson is making two promises. A better deal for older users and better connections for the whole population.

The feedback the industry has from the older generation is that they are less interested in data than their younger counterparts and if ‘they don’t want it, they don’t want to pay for it’.

The answer from a combined Three-O2 is that they won’t have to.

‘We have proposed a tariff that strips out all the data but allows unlimited voice and text. We are prepared to offer it for £5-a-month,’ says Dyson.

The other commitment that he is making is to end the frustration of most mobile users about unreliable signals. Analysis by OpenSignal suggests that only 70pc of the UK’s roads have coverage and just 72pc of railways. He says that by bringing together the combined technical assets of the two enterprises a merged group will be able to offer 90pc coverage.

At this point Dyson descends into technical gobbledegook about masts and spectrum. Essentially his claim is that because there will be more masts, and O2 has spectrum that reaches further, the new entity will be able to eliminate many of the blank spots.

The deal would also offer a future route for the new company to the stock market. Three is wholly owned by Hong Kong’s richest man Li Ka Shing, one of the largest investors in Britain’s infrastructure. The new company will have a broader ownership with the stake of Li Ka Shing’s Hutchison coming down to 67pc and investors including sovereign wealth funds from Canada, Singapore, Abu Dhabi and Brazil taking the rest.

PROMISING to share the benefits with consumers as well as the new owners, Dyson sees massive cost saving opportunities of £4bn over time.

As for the name of the new group, he is still undecided: ‘We could go with one of the brands or go with 03, 0 Cubed or whatever it might be. Or you could create a new brand as EE have done [from T-Mobile and Orange]. Or we could run with both of them.’

At the moment, however, branding is the least of Hutchison and Three’s problems. The European Commission remains a significant hurdle and it may well decide too much mobile power would be concentrated in two few hands. It would be deeply unfair, given the BT- EE merger, but over the longer haul could be the best outcome for customers.