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EU blocks O2 acquisition by Three

European competition commissioner Margrethe Vestager said the deal would have been bad for competition and would have hurt innovation.

She said: “Allowing Hutchison to take control of O2 on the terms they proposed would have been wrong… We were very concerned that consumers had less choice in finding a mobile plan that suited their needs and paid more than without. It would also have hampered the innovation and development of network infrastructure in the UK, which is a serious concern, especially for rapidly changing markets. The remedies offered by Hutchison were not enough. to prevent this.

The Commission cited three main concerns to justify blocking the takeover:

  • A Three-O2 merger would mean less competition between UK mobile networks, which may lead to “higher prices and reduced choice and quality for consumers”
  • The merger would hamper any further development of the country’s mobile infrastructure
  • And, finally, that would mean a reduced number of mobile networks willing to host MVNOs (Mobile Virtual Network Operators) – such as Virgin Mobile, giffgaff, etc. – putting MVNOs in a weaker position

Hutchison / Three offered a few solutions to help address these issues should the deal go through, including setting aside some of the new network’s capacity for MVNOs. However, the Commission considered that they were not really sufficient.

“Even if these offers had been accepted,” the EU said, “the mobile virtual operators would have been commercially and technically dependent on the merged entity”.

Other proposed solutions would also have been “difficult to implement and control effectively” or “commercially unattractive”, according to the EU.

Hutchison is not very happy with the decision. He said the acquisition would have brought “major benefits to the UK … by solving the country’s coverage problems, improving network capacity, speeds and price competition for consumers.”

The O2 seems less phased. “We work in an ever-changing industry and have learned to handle this change better than most,” said a spokesperson. Fair enough.

Source: European Commission | BBC

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