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CMA says proposed remedies fall short of protecting consumers; consultant warns blocking consolidation will hamper Europe’s 5G efforts.
The U.K.’s Competition and Markets Authority (CMA) issued a stern warning about 3UK’s proposed merger with O2 to the European Commission on Monday, claiming that the tie-up could cause long-term damage to the mobile market.
In a letter addressed to EC competition commissioner Margrethe Vestager, CMA chief executive Alex Chisholm said that the remedies offered by 3UK parent CK Hutchison "fall well short" of countering the potential loss of competition resulting from the deal.
"The proposed remedies are materially deficient as they will not lead to the creation of a fourth mobile network operator (MNO) capable of competing effectively and in the long-term with the remaining three MNOs such that it would stem the loss of competition caused by the merger," he said.
CK Hutchison has pledged to freeze prices for five years, and invest £5 billion in its U.K. mobile operations over the same period if its acquisition of O2 is waved through. It has also offered to sell mobile network capacity to facilitate the entry of new competitors.
A report last week claimed that Hutch has already agreed a £2 billion to sell 20% of the capacity of the merged mobile network to Sky. The same report claimed that it has struck a similar deal with Virgin Media for a further 10%.
This is not enough for the CMA though. Chisholm wants to see Hutchison divest either the 3UK or O2 mobile network in its entirety, or hive off physical assets and spectrum sufficient to create "a commercially viable" fourth player.
"Absent such structural remedies, the only option available to the Commission is prohibition," he said, on the grounds that the merger is likely to lead to higher prices.
Monday’s news prompted Swedish telco consultant Bengt Nordstrom to issue a stern warning of his own.
"If regulators and competition authorities only focus on consumer prices, we will be the last industrialised region in the world to reach 5G," he said.
Nordstrom said that consolidation will foster long-term investment in infrastructure, and healthy competition at both a network and service level. He also said that preventing the 3UK/O2 deal will put BT, which recently completed its acquisition of EE, at an insurmountable advantage.
"Alex Chisholm believes that the entire mobile network of O2 or 3 should be sold to an appropriate buyer. But who would be the buyer?" The business case for a new entrant in a mature market is very weak," Nordstrom continued.
"If the EU and national regulators are to base a competition policy on a minimum of four players per market, what they are in reality wishing for is ignorant investors or born-to-lose operators," he said.
The European Commission has set a provisional deadline of 19 May to issue a decision on the 3UK/O2 merger.
