Out-Law News 1 min. read

Divestment of Three or O2's mobile network business 'only appropriate remedy' to concerns over merger, says UK authority

The European Commission should prohibit the merger of UK mobile network operators Three and O2 unless Three's owner Hutchison Whampoa offers to sell off one of the businesses as a condition of the deal, the UK's main competition authority has said.

In a letter to the Commission, Competition and Markets Authority (CMA) chief executive Alex Chisholm expressed concern about the "significant impediment to effective competition in retail and wholesale mobile telecoms markets in the United Kingdom" he said would arise if there were just three main mobile network operators (MNOs) left in the UK.

The European Commission has been assessing the impact of the proposed merger on competition. Earlier this year the Commission expressed its concern about the deal, but Hutchison has proposed remedies in an attempt to alleviate them and gain the Commission's support for the deal to go ahead.

Chisholm said, though, that the proposed remedies are "materially deficient" and that only the creation of a new fourth MNO "capable of competing effectively and in the long-term" with the merger Three/O2 entity, EE and Vodafone "would stem the loss of competition caused by the merger".

"The only appropriate remedy that would meet the criteria that the Commission is bound to apply (i.e that the remedies eliminate the competition concerns in their entirety, are comprehensive, effective and capable of ready implementation) is the divestment – to an appropriate buyer approved by the Commission – of either the Three or O2 mobile network businesses, in entirety, or possibly allowing for limited ‘carve-outs’ from the divested business," Chisholm said in his letter.

"The divestment would need to include the mobile network infrastructure and sufficient spectrum to ensure a commercially viable fourth MNO in the UK. Absent such structural remedies, the only option available to the Commission is prohibition. The CMA urges the Commission to act to prevent the long-term damage to the UK mobile telecoms market, and therefore to the interests of UK consumers, that both of our authorities have predicted will result from this merger," he said.

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