The head of the U.K.’s telecoms regulator this week revealed that she is concerned about the impact the proposed market consolidation will have on competition, and hinted that the country’s mobile sector would be better served by four network operators.
In a speech delivered at the London School of Economics and posted on the regulator’s Website on Wednesday, Ofcom chief executive Sharon White expressed concerns that U.K. consumers could be adversely affected by BT’s proposed acqu isition of EE and, more likely, the planned tie-up between 3UK and O2, which would reduce the number of mobile network operators in the market to three from four.
"We continue to believe that four operators is a competitive number that has delivered good results for consumers and sustainable returns for companies," White said, doubtless striking fear into the hearts of those involved in the 3/O2 deal.
She declined to be drawn into the specifics of the two deals, but her comments suggest she is coming down on the side of new European competition commissioner Margrethe Vestager, who stood up against TeliaSonera and Telenor’s planned merger in Denmark last month, causing the pair to abandon their deal.
White referenced remarks made by Vestager, who noted that a reduction of the number of players to three from four in an EU market can lead to higher prices for end users without encouraging greater per-subscriber investment from the operators.
Consolidation can have benefits, such as improving economies of scale for telcos, but "Ofcom’s experience is that competition, not consolidation, drives investment and delivers low prices," White said.
Further, she presented evidence to show that consumers could be suffering as a result of M&A in Europe.
"According to the Austrian regulator, mobile prices have risen by 28% since the 2013 deal reduced the number of networks to three," she said.
After a lengthy regulatory battle, Hutchison closed the acquisition of Orange Austria in January 2013, merging the business with its local 3 unit.
"I am concerned that the U.K. could end up with more concentrated markets that lead to higher prices and reduced choice for consumers, without the promised boost to investment and innovation," White said.
She concluded that the threat to competition can be mitigated with the imposition of remedies on M&A deals, but cautioned that these kinds of conditions may need to evolve as the market progresses towards fifth-generation mobile services.
She also questioned the current European regulatory framework in this area and welcomed the European Commission’s decision to address it as part of an ongoing review.
"With a change in the framework we could do more to facilitate the entry of new operators, keep low price deals on the market for longer or require companies to give up spectrum," she said.
