CMA Calls for Significant Competition Review of Three UK and O2 Deal

The £10.25bn Hutchison Whampoa (Three UK) deal to buy O2 from debt-laden Telefonica looks set to face a big hurdle after the Competition and Markets Authority preliminarily ruled that the “transaction threatens to significantly [affect] competition” in the United Kingdom’s mobile market.

The two operators originally reached a “definitive agreement” in March 2015 (here), although the deal was always likely to attract more regulatory concern than the BT and EE merger because it threatened to reduce the number of primary Mobile Network Operators (MNO) in the market from four to three (Three UK would also be left as the only pure mobile operator).

As such the CMA has been busy conducting a probe of the deal and their preliminary ruling has today found enough cause for concern that they’ve decided to formally request for the European Commission (EC) to refer Hutchison’s proposed acquisition back to the CMA for a proper investigation.

CMA Statement

“The Competition and Markets Authority’s (CMA) initial view, following consultation and preliminary analysis, is that the transaction threatens to affect significantly competition in the UK retail mobile and wholesale mobile markets.

It also believes it is appropriate for the case to be referred to the CMA for investigation because any impact on competition resulting from the merger will likely be limited to UK consumers and because of the CMA’s experience in investigating telecoms mergers – as demonstrated by the CMA’s ongoing investigation into the BT/EE merger in this market.

Given the clear links between these 2 cases it would be more efficient to also examine the merger between Three and O2, in particular to avoid duplication and fragmentation. The CMA also received support from industry participants in making the request.”

The European Commission will now have until 30th October 2015 to make a decision on the request. At this point it’s worth noting that the EC has already blocked a similar merger between TeliaSonera and Telenor in the Danish market because it too would have reduced the number of primary operators to three and at a time when regulators want to see more choice, not less.