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Consultant warns telco regulators are too consumer-focused; says digital society dream will only come true via private investment.
Blocking 3UK’s proposed acquisition of O2 would send a negative message to investors, particularly in light of Ofcom’s recent decision to approve BT’s EE buy.
"Ofcom quite easily approved BT/EE, creating a £24 billion-revenue company," said Bengt Nordström, CEO of Swedish telco consultancy Northstream, during Mobile World Congress this week.
While BT and EE come from the fixed and mobile worlds respectively, their merger is still "full of potential synergies" in areas such as IT and customer service, which has significant implications for the size of investments the merged entity will be able to make, he explained to Total Telecom.
"So when they say O2 and 3 can’t merge, it looks odd to me."
Hong Kong’s CK Hutchison agreed to acquire O2’s U.K. unit in March 2015 for £10.25 billion, with a view to merging it with its own mobile operation in the market, 3UK.
The deal is currently the subject of an in-depth investigation by the European Commission on grounds that the merger could lead to higher prices in both the retail and wholesale markets. It is also worried about the potential for reduced network investment and harming the negotiating power of MVNOs.
In February, Ofcom CEO Sharon White expressed concerns of her own, particularly with regard to potential price rises resulting from the transaction.
"We have to appreciate the value we’re getting from operators," Nordström said, "Usage has gone up and what you get for your money is a lot."
Regulation is important for preventing companies from abusive practices, he conceded, but a balance must be struck.
"Governments want digital societies, with fibre, and 4G, and 5G…It all requires private investment," continued.
"Regulation is too consumer-focused. If they block the 3UK/O2 deal, it tells investors to be cautious about investing because they don’t know whether they can exit the market when someone with greater scale comes along and tries to buy them."
