Exclusive: O2 CEO “very confident” Hutchison deal will get EU green-light

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Ronan Dunne expects £10.25 billion sale to receive clearance despite concerns from European Commission EE CEO Olaf Swantee backs claims consolidation benefits competition

O2 CEO Ronan Dunne says he fully expects the European Commission to green light the operators proposed £10.25 billion sale to Hutchison by the end of April next year.

The European Commission has recently conducted an investigation into the deal, raising concerns the merger may negatively impact the market due to reduced competition. This it says could lead to higher prices for customers and MVNO’s and less investment into the networks (see text in red below).

The same fears were expressed by Ofcom’s chief executive Sharon White last month (October 9) surrounding BT’s proposed £12.5 billion acquisition of EE. She notes consolidation in Austria between Hutchison and Orange in 2013, has resulted in price-hikes of 28 per cent.

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However Dunne, who was speaking to Mobile News following the release of the operators latest financial results, rejected these concerns, insisting competition would only suffer should the deal not get the go ahead.

“I’m very confident the deal will receive regulatory clearance,” said Dunne. “The UK market is changing and you are going to have a big competitor in BT/EE with their converged offering, so it’s really important that the mobile champions in the market have enough scale to be able to continue to compete.

“Everyone around us is getting bigger, so we need to be able compete for investment and to differentiate on behalf of customers. If people aren’t making adequate returns, then competition will suffer.

“I see a clear and compelling case for customers. By putting Hutchison and O2 together, it would be putting customers first by ensuring the ones that deliver the best customer service are seen as the best customer champions.

“There is therefor a very strong case to put the two businesses together and will actually be a better outcome for customers.”

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EE dismisses Ofcom concerns 

EE CEO Olaf Swantee (pictured above), speaking to Mobile News last month, was also critical of Sharon White’s comments around competition and her comparing the UK with Austria when discussing potential price rises.

Swantee, who previous headed up Orange in Austria, noted pricing in that market has historically been “out of sync” with others countries and even with the price rises seen,were still comparatively low.

Sharon White Hi-res - March 2015
Concerned: Ofcom’s Sharon White

“I haven’t checked lately but I understand pricing is still quite attractive when compared to other countries,” said Swantee.

“If you look at world wide stats, the problem is not in Austria, it’s in the US (average $49 per month) or Japan ($54 per month) maybe where pricing is higher. But I honestly don’t think it is in Austria. I’m not sure Austria is a key country to be looked at.”

He continued: “What they (EC) need to look at is overall how does pricing sit versus other markets and is it out of sync. Is it it out of sync due to competition or for other reasons and how do we balance that. Many European countries have been behind other regions in terms of the infrastructure, because if you don’t have a consolidated footprint it’s harder to get the financial muscle.”

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To highlight the importance of consolidation (mergers), Swantee added that EE, which was the first to launch 4G in the UK and now has 14 million customers and 93 per cent population coverage, would not have been able to achieve what it has to date if it had remained as Orange and T-Mobile, nor had made such investment commitments.

“If Orange and T-Mobile were still here today, and not had the approval to combine the two, we would not have a 4G infrastructure which is ahead of other markets, no way,” said Swantee. “Certainly from my perspective, we wouldn’t have invested. You need certain scale. European regulators talking about it being bad for consumers and prices going up, I think that’s a fairly simplistic view of consolidation. “Consolidation can bring, as we have demonstrated, big benefits for consumers, customers and the country.”

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