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U.K. regulator uses new pricing study to reiterate its stance that reduction in the number of network operators would be bad news for consumers.
Ofcom this week published the results of a new study on the price of mobile services that suggested the proposed merger between O2 and 3UK could bring with it hefty hikes for customers.
The U.K. regulator examined prices in markets with varying numbers of operators and with or without the influence of disruptive players. One of its key conclusions was that the O2/3UK tie up could push prices up by around 20%.
The study showed that prices are between 17.2% and 20.5% lower in markets with four or more mobile network operators, one of which being a disruptive player. Ofcom highlighted France’s Free Mobile and CK Hutchison’s 3UK as prime examples of market disruptors.
"By implication, this may suggest that removing a disruptive player from a four player market (as is proposed in the 3UK/O2 merger in the U.K.) could increase prices by between 17.2% and 20.5% on average, all else being equal," Ofcom said.
Hutchison agreed to acquire O2 UK from Telefonica for £10.25 billion a year ago and the deal is currently being examined by competition authorities at the European Commission. On Monday it emerged that the firm has offered to allocate more than a third of the merged entity’s network capacity to a rival player, in its latest bid to win over the Commission.
While Ofcom is not in a position to approve or deny the merger request, it has on multiple occasions expressed concern about the impact on consumers that would stem from a reduction in the number of players in the market.
Ofcom CEO Sharon White last year made it clear that she believes four to be the appropriate number of network operators to ensure a competitive market, echoing the sentiments of European competition commissioner Margrethe Vestager, who famously blocked Telenor and TeliaSonera’s plans to merge in Denmark on the grounds that the deal would reduce the number of network operators in the country to just three.
White used Austria to back up her fears on price rises, claiming that prices have increased by 15% in the country since the 2013 tie-up between 3’s local unit and Orange.
Ofcom again referred to Austria in its new study, noting that recent iterations of the Austrian regulator’s price index shows prices have increased for mobile users in the past few years.
However, last week the former head of the Austrian Regulatory Authority for Broadcasting and Telecommunication (RTR) refuted such claims.
Georg Serentschy said that while the RTR mobile price index shows an uptick in bills since the merger, it does not take into account increases in usage. Unit prices have in fact fallen, he said.
