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Ofcom calls for Three and O2 merger to be blocked due to price hike concerns – Inquirer

UK TELECOMS REGULATOR Ofcom has urged Brussels to block the planned merger of O2 and Three over fears that it could cause mobile phone bills to rise.

The watchdog kept fairly quiet about BT and EE’s recently completed merger, but has spoken out against Hutchison’s plans to purchase O2 from Telefónica for around £10bn.

Ofcom chief executive Sharon White predicted a rise in bills for consumers and businesses, and said that the merger of two of the UK’s four operators could affect rival high-street retailers and upset existing network arrangements.

White said in The Financial Times: “We are concerned that the smallest mobile network, Three, proposes to become the biggest by acquiring its rival O2.

“Many of our concerns relate to competition between operators who own the networks on which mobile phones rely. Only these four companies can make your mobile signal faster, more reliable and more widely available. Establishing a new mobile network might be one answer, but this would take time and considerable investment.

“While the merger is reviewed, Ofcom will keep working to promote healthy rivalry between operators. We want UK consumers and businesses to enjoy fair mobile prices and cutting-edge products for years to come. For that we need strong competition: the basis of protection and the incentive to progress.”

White had voiced concerns just days before that prices could increase after Three irked hundreds of thousands of its customers with the news that prices will soon double for many given the discontinuation of older tariffs.

She is also worried that the impact of the merger “may be felt on the high street”, given that it could tip the balance of power “between mobile networks and the independent retailers who help constrain the price of mobile handsets and bills”.

Sky, meanwhile, has spoken out in favour of the acquisition, The Telegraph reported, noting that the future doesn’t look bright for Telefónica if the deal is blocked.

Sky chief strategy officer Mai Fyfield said: “We do think that Three’s ownership would be a good thing for all MVNOs sitting on the network in the sense of continued investment in that network.

“It’s important that it’s a good network. And I think under Three’s ownership we would be more confident that the direction of O2 would be clear. If it’s blocked there is going to be a question over what happens to Telefónica. It doesn’t look like it is interested in being a long-term owner.”

Three, funnily enough, seems to agree. It told The INQUIRER in a statement: “Three UK’s acquisition of O2 will provide the smallest operator with the scale and financial strength to be able to continue to compete aggressively in the market as a focused, pure-play mobile operator against powerful fixed and media convergent operators.

“The combined business will significantly enhance the wholesale market, offering access to a best-in-market network and enabling a range of better and stronger offers by a range of other providers for consumers.”

The European Commission is due to issue a formal Statement of Objections on Tuesday stretching to hundreds of pages. Hutchison is expected to argue that evidence from a mobile merger the firm carried out in Austria two years ago shows that guaranteed MVNO capacity can lead to falling prices for consumers. µ

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