Top Story

Three Finalises Deal with O2 for £10.25bn

Telefonica has finalised a deal to sell its UK mobile arm O2 to Hutchinson for £10.25bn. The companies have been in talks for weeks and have reached the agreement following the completion of due diligence. The combination of networks Three and O2 will form the largest UK mobile operator ahead of EE, however the deal is still subject to regulatory approval… which could take up to a year.

Combining O2 and Three would cut the number of major mobile operators in the UK from four to three. The combined company would surpass EE, which has a 29% market share, to give it 41%. The move now leaves Vodafone trailing the pack in its home market.

Matthew Howett, Practice Leader, Regulation, Ovum commented on the deal, “With both BT and Hutchison (Three’s owners) having now reached definitive agreements to acquire EE and O2 respectively, the focus turns to getting the necessary regulatory approval. The exact timing and next steps in each case remain somewhat unclear given the complexity of what lies ahead, but approval could take up to a year and will almost certainly be fraught.

The UK’s competition authority, the CMA, has already invited stakeholders to comment in relation to BT/EE. A full investigation will begin once formal notification takes place. In the case of Three/O2, European authorities will probably take the lead, but they will likely need to remain in close contact with the CMA over issues coming out of BT/EE.

In both instances the battle lines have been drawn, and it’s becoming clearer what concessions might be offered in an attempt to get things through, or what potential remedies might be imposed from above. These will almost certainly focus on mobile backhaul, spectrum holdings, and the current network sharing agreements between Vodafone and O2, and Three and EE.

A number of uncertainties remain, however. First, how will the CMA consider Three/O2 as it works its way through BT/EE? EU competition authorities are unlikely to want to hand over control of the Three/O2 approval, but the CMA might try its luck and ask for jurisdiction. Which leads to the second uncertainty: how EU competition authorities will view further consolidation (the now-familiar cases of Germany and Ireland were approved under the previous Commission) and what concessions they might accept. MVNO access has been a popular choice, but the UK already has a vibrant MVNO scene and so that is less relevant here. Instead, competition authorities will want to preserve the “challenger” behavior in the market we’ve seen from Three. What could that look like? Will Vodafone’s bullish statements about moving into broadband and TV be enough?”

The following two tabs change content below.

David Dungay

Editor - Comms Business Magazine