Ofcom: Prices could rise 20.5pc if Three merges with O2

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Study of mobile prices in 25 countries over a five year period concludes consumers could end up paying a fifth more for their contracts

An Ofcom report has suggested that removing a ‘disruptive’ mobile operator from the market could lead to price increases of up to 20.5 per cent.

The report examines mobile pricing in 25 countries from 2010 to 2015 using two sources. In the report, Ofcom classifies a disruptive firm as one that doesn’t follow the crowd and actively disturbs the existing market dynamics.

Price rise

The analysis suggested that prices are between 10.7 per cent and 12.4 per cent lower compared to countries where a disruptive firm is not present, and between 7.3 per cent and 9.2 per cent in countries where there are a greater number of players.

Combining these two variables suggests that prices could therefore increase significantly. “By implication, this may suggest that removing a disruptive player from a four player market (as is proposed in the H3G/O2 merger in the UK) could increase prices by between 17.2 per cent and 20.5%% on average, all else being equal,” Ofcom added.

The findings are released after a report in The Financial Times claimed Three’s parent company CK Hutchison will offer to give up to 30 per cent of its spectrum to rivals in a bid to win regulatory approval for the deal.

At Mobile World Congress last month, O2 UK CEO Ronan Dunne hit back at Ofcom chief Sharon White after she claimed a potential sale could damage the UK, stating he “completely rejects” her argument.

He argued the formation of a “customer-led mobile champion” would in fact benefit the UK market as a whole.

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