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UK’s CMA says Vestager must create new operator if O2/Three merger is to proceed

vestager

via Flickr © FriendsofEurope (CC BY 2.0)

  • UK competition authority urges stiff remedy for Three/O2
  • Three says establishing a competitor would "undermine the whole economic rationale of the merger”

Things don’t look good for the proposed Three/O2 merger in the UK which would, on the face of it, reduce the number of competing mobile operators to just three. The UK Competition and Markets Authority (CMA) appears to be worried that the EU’s Competition Commissioner, Margrethe Vestager, may be preparing to let the merger pass without enough competition-enhancing remedies and he has decided to stiffen her backbone with a well-placed letter to voice “serious concerns”.

If the deal were to be waved through with minor remedies, says CMA  chief executive Alex Chisholm, it would make Three the biggest mobile player in the UK market and would seriously threaten price competition. Chisolm and the CMA fears that the move would cause long-term damage to UK consumers because experience of previous ‘four down to three’ operator mergers in Europe appears to show almost instant price rises.

Vestager has made it clear that she’s not bound by precedent one way or the other but that each merger proposed will be judged by on its merits in relation to the national market it happens to be  in. Last year she imposed remedies on a proposed merger between operators TeliaSonera and Telenor in Denmark that proved too onerous for the parties to proceed.

The UK market is complicated by a tangled web of existing network sharing arrangements which, the CMA says, clouds the picture somewhat. As things stand, says the CMA, Vestagers’s proposed remedies can’t do the trick since they would need to lead to the establishment of another operator - and currently they won’t do that.

Unless the merging parties endower a fourth operator with its own network infrastructure and spectrum and give it a better than fighting chance to survive then the merger should be prohibited.

Three’s statement is predictably downbeat, pointing out that the proposed remedy would “undermine the whole economic rationale of the merger”.

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