Three’s O2 deal set to be hit by tough EU merger conditions

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Reports claim Brussels will rule on CK Hutchison’s £10.25 billion buyout of O2 this week, but the operator could face tough concessions to secure a deal

Three parent company CK Hutchison could see its takeover bid for rival O2 hit a major hurdle this week as the European officials force tough concessions on the proposed £10.25 billion buyout,

Reports in the Telegraph claim Brussels policymakers will attach tough rules onto any deal when they release preliminary findings this week.

The European Commission has until March 12 to issue a ruling, but the reports claim their initial findings will be published far earlier, demanding Three give up spectrum before it is allowed to buy its rival.

The deal will see the number of UK operators fall from four to just Three/O2, Vodafone and EE, who will be bought by BT in a £12.5 billion deal to be completed on January 29. The Competition and Markets Authority rubber-stamped the BT/EE deal last week.

European Commissioner for competition Margrethe Vestager, who has said it is necessary to have at least four mobile network operators in each country, said: “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.”

“Very confident”

A similar merger in Denmark was derailed last year due to EU conditions. Telenor and TeliaSenora were due to merge their Danish units, but cancelled the merger in September, citing difficulties reaching terms with the EC.

The news comes despite O2 CEO Ronan Dunne’s claim to Mobile News in November that he was “very confident” the deal would be cleared.

Dunne, who will step down from the merged company should it gain approval, claimed the UK market is currently in flux and the deal would prove beneficial for customers.

He said: “I’m very confident the deal will receive regulatory clearance. 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.”

3 COMMENTS

  1. Three since its entry onto the UK market has shown itself to be a refreshing, innovative value for money company in the UK, it should be rewarded for this by allowing it to grow. Having better network coverage should be the aim of the EU, if I’m in trouble I want the best coverage and these mergers deliver that. Customers in the mobile market are more mobile than most and happy to move to other deals and companies which keeps our mobile prices some of the most competitive in the world

  2. Interesting how regulatory thought processes work. If it were me I would question more the effect on choice of BT/EE that O2/3. The formers ability to offer bundled packages to consumers is a powerful attractor.

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