Three UK and O2 Merger Investigated by European Commission

The European Commission has today launched an “in-depth investigation” into the proposed £10.25bn Hutchison Whampoa (Three UK) deal to buy rival mobile operator O2 from debt-laden Telefonica, which has given rise to significant competition concerns.

Earlier this month the Competition and Markets Authority preliminarily ruled that the “transaction threatens to significantly [affect] competition” in the United Kingdom’s mobile market (here), which occurred because the merger would reduce the number of primary Mobile Network Operators from four to three (i.e. regulators want to see more competition, not less).

At the time the CMA said they had formally requested for the EC to refer Hutchison’s proposed acquisition back to the CMA for a full competition investigation, which they believed was the best course of action because there is some cross-over with the on-going probe of BT and EE’s merger; the latter deal was given preliminary approval this week (here).

However the EC, which recently blocked a number of similar deals, has today launched its own investigation and warned that the deal between Three UK’s parent and O2 could lead to “higher prices, less choice and reduced innovation for customers of mobile telecommunications services in the UK.”

Margrethe Vestager, Commissioner for Competition Policy, said:

“Mobile telecom services are increasingly important to consumers. Both to keep in touch with family and friends and to access online services. With this investigation we want to ensure that consumers in the UK do not pay higher prices or face less choice as a result of this proposed takeover.”

The EC now has 90 working days, until 16th March 2016, to take a decision and few would be surprised if they found against the deal or imposed significant conditions. The two operators originally reached a “definitive agreement” in March 2015 (here), although the deal was always likely to attract more regulatory concern due to its above stated impact on the UK market.