Will 3 plus O2 bring on a 4 to 3 transformation in the UK mobile market?
The UK’s second current bit of mobile network M&A action - the Hutchison Whampoa bid for O2 - has apparently ‘cemented’ according to reports. Both moves present a headache for the regulator. BT’s purchase of EE doesn’t diminish the actual number of mobile networks in the UK, but it does put tremendous market power into the hands of the dominant fixed line operator, BT, at a time of massive fibre upgrades to all the RAN networks here. What to do?
The Hutchison Whampoa bid for O2, which, in a confusing addition of numerals, will be added to its existing ‘3’ network, is in most ways simpler. This is a straight ‘four to three’ merger in that the outcome will see just three separate mobile networks in the UK - 3/O2, BT/EE (if that gets through) and Vodafone. Recent facts on the ground strongly indicate that prices go decidedly up when 4 to 3 mergers take place (Doh! This is the whole rationale behind them!) despite attempts to mitigate their anticompetitive effect, such as ensuring that new MVNO network launches are mandated as part of the deal.
But the ‘cementing’ of the deal, pegged at £10.5 billion now, after several months’ due diligence, must indicate that the parties feel confident that their deal will go through, albeit with conditions attached.
Hutchison Whampoa and its charismatic boss, Le Ka-sing, are apparently close to signing and the deal may be announced this week. Mr. Li, Asia’s richest man, has been on a spending spree in Europe since the financial crisis, buying into big solid assets such as utilities, but the O2 purchase will be his biggest buy yet.
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