Monday, February 1, 2016

Ofcom Chief Opposes 3, O2 Merger

A decision to approve the proposed U.K. merger of O2 and Three lies with the Europe Commission’s antitrust regulator Margrethe Vestager, not Ofcom, the U.K. regulator. And some might argue the merger, which would have faced high obstacles, will face higher obstacles.

Sharon White, Ofcom CEO, now says she opposes the merger, which would create a new market leader with 40 percent share.

The arguments opposing the deal mark the strongest position taken on the £10.5 billion merger by Ofcom CEO White.

Ofcom’s intervention raises further doubts about the attempt by Hong Kong’s CK Hutchison to acquire O2 from Telef√≥nica to merge with Three, the smallest mobile operator in the UK.

White argues the creation of another, fourth network to replace O2 "might be one answer" for some of her concerns, but would take "time and considerable investment".

That is one example of regulator belief that four leading operators are required to obtain the benefits of robust competition. Ofcom, for example, notes that average prices, over the past 25 years, are as much as 20 percent lower in markets with four operators, compared with those with only three leading networks.

Much hangs in the balance. The proposed merger is seen as a test case for similar deals across Europe.

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