With the dust beginning to settle on the news that the UK will not see Three acquire O2, the industry has begun to sift through the implications and Brussels comes in for its share of criticism.

No one was surprised that the deal was blocked, particularly given well-publicised fears about competition and price in the lead up to decision.

Could Three’s parent CK Hutchison have done anything different?

CCS Insight Analyst Kester Mann, said: “[CK Hutchison’s] apparent preference to assist virtual providers or those with a heritage in fixed-line broadband or TV including Virgin Media, rather than facilitate a more mobile-focussed rival, may have been the undoing of the deal.”

But citing the Commission’s alleged inability to consider the telecoms market outside of distinct mobile, fixed, broadband and TV networks, Strand Consult Founder John Strand thinks the deal was always going to fail.

He said: “Margrethe Vestager and her team at the Directorate-General for Competition do not understand the telecommunications market.

“While the documents about the denied merger have yet to be released from DG Comp, we do not expect there to be any empirical evidence that blocking mergers in the competitive mobile industry leads to lower prices and more innovation.”

Mann is less cutting but also calls into question Brussels’ approach.

He said: “After similar deals were waved through in Austria, Ireland and Germany, the Commission has either been hugely inconsistent in its merger and acquisition policy or failed foresee the alleged negative impact in these markets that have already consolidated.”

This inconsistency could see CK Hutchison’s option to launch a legal challenge, which it alluded to in its statement following the Commission’s decision, having a degree of merit.

“Strand Consult recommends that Hutchinson sue DG Comp and expose the commission authority’s lack of transparency and lack of knowledge about how modern telecom industry operates,” Strand said.

Ovum’s Matt Howett believes such a course of action would be unwise.

“Although an appeal of the decision is possible, Three and O2’s attention should now turn to how they can best compete in the market against an enlarged BT/EE given the increasing propensity for convergence,” he said.

“Neither Three nor O2 can stay as they are.”

There is much speculation about what the two parent companies will now do. “The most likely eventual outcome for O2 is sale to private equity, however Liberty Global, which owns Virgin Media, could consider a bid,” Mann said.

“Sale or partial-sale to a deep-pocketed operator from outside the UK such as Softbank or America Movil is also plausible.

“For the time being however, Telefonica may elect to hold on to an asset that in recent years has impressively out-performed rivals despite its uncertain future.”

The future of Three UK is equally uncertain.

“A possible option could be to acquire TalkTalk,” said Mann.

“The broadband and TV provider deploys a similar low-cost strategy and could be available in a cut-price deal having been badly damaged by a recent security breach.

“Such a deal would not attract major competition concerns and would offer greater scale as well as a position in the rapidly-growing UK multiplay market.”

TalkTalk was on the front foot as soon as the Commission’s decision was made public. CEO Dido Harding said: “We were always clear that going from four mobile networks to three would have meant higher prices and less competition, so it’s reassuring to see competition regulators standing firmly on the side of consumers.”

However, Imran Choudhary, Consumer Insight Director at Kantar Worldpanel, believes the question of how sustainable a four-operator market structure is remains uncertain.

He said: “As it becomes increasingly difficult for networks to generate revenue, the significant expenditure needed to facilitate growing data consumption is going to be more of a burden on both Three and O2.

“Customers are the ones who will suffer if the UK lags behind – the very opposite of what the regulators wanted.”

Howett says one thing is certain; no matter who ends up owning O2 or merging with Three, “no combination will rebalance the mobile market in the same way that allowing Three and O2 to merge would have achieved”.

 

More Features

Opinion: Could second brands become operators’ training ground? Opinion: Could second brands become operators’ training ground? By Jonathan Plant, Senior Marketing Manager, Openet More detail
Opinion: Cloudification is coming, but processes and culture must change Opinion: Cloudification is coming, but processes and culture must change By Santiago Madruga, VP of Communications Service Providers market, Red Hat EMEA More detail
Vodafone’s IoT head hits out at "annoying" criticisms of operator role Vodafone’s IoT head hits out at The claim that connectivity is a commodity has existed in the mobile industry for some time and has recently extended itself to the Internet of Things. More detail
Telcos bet on eSports to get down with the kids Telcos bet on eSports to get down with the kids In some circles, attempting to shrug off the image of being a bunch of crusty old network engineers by buying an eSports team would be regarded as the very definition of having a midlife crisis. More detail
Deutsche Telekom’s Head of Europe rails against “really dangerous” regulatory mindset Deutsche Telekom’s Head of Europe rails against “really dangerous” regulatory mindset Complaining about the regulatory landscape has been de rigueur in European telecoms for many a long year. More detail
    

 

European Communications is now
Mobile Europe and European Communications

  

From June 2018, European Communications magazine 
has merged with its sister title Mobile Europe, into 
Mobile Europe and European Communications.

No more new content is being published on this site - 

for the latest news and features, please go to:
www.mobileeurope.co.uk 

 

@eurocomms

Other Categories in Features