EU regulators block the tie-up of 02 and 3 in tougher stance
The European Union has blocked a merger of the UK arms of mobile phone operator 3 and 02 in a hardline ruling that may slam the door on similar deals unless operators are willing to offload more of their prized assets to preserve competition.
Now regulators say a similarbut larger deal in Britain cannot go ahead, saying pledges to increase investment and freeze prices failed to offset antitrust concerns. It suggests a hardening of attitudes after ago regulators gave the green light to Hutchison's 3 business here taking over Telefonica's Irish 02 unit in an €850m deal just two years a go, reducing the number of major players in the Irish market from four to three.
The move to block Hutchison's billionaire owner Li Ka-shing buying Telefonica's O2 unit in the UK is the first-ever mobile tie-up to be vetoed by the European Commission.
"The UK market is very competitive - prices paid by UK consumers are among the lowest in the European Union," EU Competition Commissioner Margrethe Vestager said in Brussels yesterday. "If the takeover had gone ahead, this would have changed for the worse."
The EU ban is a blow to further tie-ups in the fragmented European mobile industry. Regulators cleared previous deals that reduced the number of operators from four to three, including in Ireland, on condition that the merging companies offer space on their systems to smaller rivals that don't own their own wireless networks. The UK is a vibrant market for these so-called MVNOs, or mobile virtual network operators.
"If you can't find a way to clear four to three in the UK, you're probably not going to be able to find it anywhere else in the EU," said David Cantor, a Brussels-based lawyer at Telecommunications Law & Strategy. "There were a lot of hopes that the commission and Hutchison would come to terms."
Hutchison said it was "disappointed" by the decision and is considering a legal challenge. Combining O2 with Hutchison's Three unit would have led to higher prices for all operators in the UK, the EU's analysis found.
The merged firm's involvement in both of the country's network-sharing arrangements "would have weakened" BT Group's EE and Vodafone Group, regulators said.
A merger could only get EU approval if Hutchinson helped create a fourth network operator to join the network-sharing agreements, Commissioner Vestager said.