Hutchison in five-year price freeze vow to push through O2 deal

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Telecoms firm also says Three and O2 will invest £5 billion in their UK businesses and sell network capacity to enable level playing field  

CK Hutchison has vowed to freeze prices in the UK for five years as it looks to push through its £10.25 billion acquisition of O2.

In a letter published today, CK Hutchison Group-co-managing director and chairman of Three UK Canning Fok set out three promises from it if the deal was to be approved by the European Commission:

  • PROMISE NUMBER ONE: Three+O2 will NOT raise the price for consumers of a voice minute, a text or a megabyte in the 5 years following the merger. Every cost efficiency that combining the businesses achieves will be shared with our customers. Like for like, customers’ bills will go down.
  • PROMISE NUMBER TWO: Three+O2 will invest £5 Billion in their UK businesses over the next 5 years. That is at least 20% more than would have been invested by the two companies on their own. More importantly, it is much more efficient spending, so quality of service in terms of capacity, coverage, reliability and data speeds will improve much more than if the two companies had not been combined. For those who care to take an objective look, what we’ve done since combining Three with Orange in Austria in 2013 provides empirical proof of this assertion.
  • PROMISE NUMBER THREE: Three+O2 will enable other meaningful competitors in the UK market to offer services on a completely level playing field by offering for sale fractional shared ownership interests in our network capacity – in effect selling slices of the same network capacity and quality we use to serve our own customers.  This is unprecedented in the UK telecom wholesale market. It eliminates the tricks some wholesalers use to disadvantage their wholesale customers and thus make it harder for them in turn to make competitive offerings to their own customers. This approach will deliver real competition, not just slogans.
CK Hutchison Group co-managing director and Three UK chairman
CK Hutchison Group co-managing director and Three UK chairman

Fok said: “Over the last 12 years our Group spent billions to enable Three to be a major competitive force in UK mobile. From the outset, we have followed the principle that as technology improves people should always get more and pay less for their mobile services.

“That has not always made us popular with our competitors. And of course, not all of our efforts have succeeded and sometimes we have had to retrench when conditions in the market or spectrum auction outcomes have made our efforts unsustainable. But we have always strived to be a consistent force for consumers, and I believe our reputation as the challenger in Britain is the proof of that.

“Now let me make one thing clear: the combination of Three (the smallest operator in the market) with O2 makes us able to stand up to the new Leviathan BT (in the blunt words of Dido Harding, Chief Executive of TalkTalk, earlier this week), not to mention to the old top-of-the-heap predator Vodafone and is the only way we can guarantee that five years from now customers will still be getting more and paying less for mobile services.

“In short, over the next 5 years Three+O2’s customers will be getting more and paying less than they do today for mobile services and the wholesale market will also be better off.  Let me emphasize: This is not an aspiration. It is a guarantee. Over the coming weeks the promises I have laid out will be an important part of the case Three will put to Europe’s competition authorities, who have had the wisdom not to rush to judgment until, as the law requires, they have heard our response to their concerns.

“We believe they will make the right choice for Britain, for British consumers, and for Europe.”

Ofcom chief executive Sharon White
Ofcom chief executive Sharon White

This letter and three promises comes just days Ofcom urged European regulators to block Three’s proposed takeover of O2 amidst fears it will lead to high mobile bills for consumers in the UK.

Chief executive Sharon White also warned the multi-billion pound merger could harm competition in reducing the number of mobile operators in the UK from four to three, that there would be a disruption to the existing UK network arrangements between Three and EE, and Vodafone and O2, and a shift in balance of power between independent retailers and mobile operators.

Last month it was also reported that the deal could be hit by tough EU merger conditions. The European Commissioner has until March 12 to issue a ruling, but it is claimed the initial findings will be published far earlier, demanding Three give up spectrum before it is allowed to conclude the deal.

European Commissioner for competition Margrethe Vestager reiterated it is necessary to have at least four mobile operations in each country, and was keen to ensure UK consumers don’t face price hikes and less choice as a result of the proposed takeover.

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