News
French businessman reportedly plans to launch mobile operation in the U.K. based on assets freed up by 3UK/O2 merger.
Xavier Niel will not find it easy to establish a new mobile operator in the U.K., if reports that he intends to do just that turn out to be accurate, that is.
The French businessman’s Iliad operation has approached Ofcom to enquire about the possibility of acquiring assets divested as a result of the planned merger between Hutchison’s 3UK and Telefonica’s O2, the Financial Times reported on Monday, citing unnamed sources familiar with the situation.
Unsurprisingly, both Ofcom and Iliad declined to comment, the paper said.
The news comes as the European Commission’s competition body examines Hutchison’s proposed £10.25 billion deal to take over O2 in the U.K.
Should the deal get the go-ahead, the Commission would almost certainly impose certain conditions upon it to ensure the market remains competitive. These conditions normally include the sale of spectrum and/or network assets and customers to curb any suggestion of dominance from the newly-merged entity.
Thus it is not much of a stretch to suggest that Brussels would welcome the news of a new market entrant, particularly one with its own infrastructure, rather than a virtual player.
But the U.K. would not necessarily provide a welcoming environment for Niel.
Iliad was highly successful in shaking up the French mobile market with the launch of its Free Mobile subsidiary in early 2012; since then, prices have come down and consolidation has taken hold, with the merger of SFR and Numericable, and current talks between Orange and Bouygues Telecom. However, it is worth noting that France was crying out for additional competition when Niel arrived.
The U.K. is a very different market.
In addition to having three strong mobile operators in the merged 3UK/O2, EE and Vodafone, the country also has a number of sizeable mobile virtual network operators (MVNOs) – Virgin Media being a prime example – and highly niche low-cost players.
There is not a huge amount of space for a Free Mobile-style low-cost mobile offer.
And as consumers increasingly take up converged and bundled offers, Niel might find it difficult to establish himself, although admittedly, that is also an issue 3UK/O2 will face.
More to the point, convergence means that Niel could well face additional competition for any mobile assets freed up by the 3UK/O2 deal. Sky is working on the launch of an MVNO and could be interested in owning assets, as could established MVNOs like TalkTalk and Virgin Media.
If he chooses to cross the Channel, Niel might find himself in for a bumpy ride.
