Competition watchdog urges block on Three/O2 merger


UK watchdog the Competition and Markets Authority (CMA) has urged European regulators to effectively block the £10.3 billion merger of mobile phone networks Three and O2.

The CMA has written to the European Commission (EU) to say the merger would be a "significant impediment to effective competition" in the UK mobile phone market.

European regulators have been studying the deal for several months since Three owner Hutchison Whampoa of Hong Kong entered into exclusive talks to buy O2 from Spain's Telefonica in January 2015.

The deadline for the EC to make its ruling on the deal is May 19, although regulators close to the process say a decision may come before that.

The CMA said the merger would cut the country's four major mobile phone players from four to three, which would not be in the interests of consumer competition.

The four major networks in the UK are Vodafone, Three, 02 and EE.

CMA chief executive Alex Chisholm said in the letter that the appropriate action in this case "is the divestment - to an appropriate buyer approved by the Commission - of either the Three or O2 mobile network businesses, in entirety, or possibly allowing for limited 'carve-outs' from the divested business".

This would in effect mean that Hutchison Whampoa would have to sell all, or most, of one of the two networks, negating the point of the merger to create a larger business.

O2 has around 28.5% of the UK market, but a merger with Three's share of just over 8% would see it climb to become the biggest operator in the UK.

The CMA cleared the £12.5 billion sale of EE to telecoms giant BT in January, creating a combination that will have around 35 million mobile, broadband, and TV customers.

The deal saw BT re-enter the mobile market, but the CMA said that deal was not likely to harm competition in the industry.

Hutchison Whampoa is owned by Hong Kong billionaire Li Ka-shing, who also owns pharmacist Superdrug and Northumbrian Water.

The billionaire also has investments in Southern Water, Wales and West Utilities, UK Power Networks, and Thamesport and Harwich ports.