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European Commission could rule against 3UK/O2 merger plan by end-April, sources say; Hutchison’s lawyers working on legal challenge.
The European Commission is poised to block CK Hutchison’s planned takeover of O2 in the U.K. on competition grounds, leaving the company to focus its attentions on its less contentious ongoing merger in Italy, it emerged at the weekend.
The firm’s concessions in the U.K. have failed to sway European regulators, Bloomberg reported, citing unnamed sources. As such, the Commission will formally block the deal, which would have seen O2 merged with 3UK, in a matter of weeks, it said.
CK Hutchison revealed recently that it has struck capacity deals with Sky, Virgin, Tesco Mobile and UK Broadband that cover more than 40% of 3UK and O2’s combined network capacity. It has also pledged to freeze prices and invest heavily in its U.K. mobile operations, and insists that its remedies go far beyond those proposed in other recent EU telco mergers.
The Hong Kong-based firm has come up against fierce opposition in the U.K. though, where the Competition and Markets Authority (CMA) has made it clear that it does not support the 3UK/O2 tie-up, warning of long-term damage to the market stemming from a lack of competition. The CMA argues that the U.K. requires a fourth mobile network operator in order to remain competitive and to ensure consumers are not hit by rising prices.
It now looks as though the European Commission is thinking along similar lines. It is holding out for Hutch to offer to sell a chunk of the merged entity’s network infrastructure to a new competitor, Bloomberg’s sources said.
For its part, Hutchison has turned its attention to Italy, where its plan to merge 3 Italia with Vimpelcom’s Wind is perhaps more likely to gain regulatory approval.
However, according to U.K. newspaper The Telegraph, Hutch is working with lawyers to prepare a legal challenge, should the U.K. decision not go its way.
The European Commission has set a 19 May deadline to issue a ruling in the U.K. case, but could make an announcement by the end of this month, Bloomberg said.
