Three promises £5-a-month pensioner tariff if it takes over O2

The owner of the Three mobile phone network, CK Hutchison, is offering sweeteners in its attempt to persuade regulators to allow it to take over O2 from Telefonica - including a £5-a-month deal for pensioners.

The merger, if it goes ahead, would create the largest mobile operator in Britain - leading to concerns that it would stifle competition and prices would rise.

In an effort to keep regulators sweet, therefore, Hutchison is now promising a contract that would allow the over-65s to pay just £5 a month for unlimited calls and texts, whatever the phone they use.

It has also promised that during the five years following the merger, it won't raise consumer prices and will invest £5 billion in the UK business.

And the company will also sell 'slices' of its network to other mobile operators - nearly a third of the two operators' network capacity in all.

"This is not an aspiration. It is a guarantee," says Canning Fok, group co-managing director for CK Hutchinson, in a statement.

"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."

However, the deal still faces strong opposition from regulators. In a report released earlier this week, Ofcom concluded that removing one player from the current big four could put prices up by as much as 20.5%.

In Austria, where there a similar merger was approved in December 2012 between Hutchison 3G Austria and Orange Austria, overall mobile prices have gone up by 15% - and 30% for those who only make calls and send texts.

And while Hutchison might guarantee that it won't raise its charges for five years in the UK, it could be a free-for-all after that.

The European Commission is also concerned about the effects of a merger on competition, and its antitrust watchdog is currently examining the deal.

The proposed merger is also under fire from consumer groups.

"Even taking Hutchison's three promises into account, there is a real risk this merger could stifle innovation and competition, reduce the incentive for networks to undercut each other, and lead to less innovative propositions," says Ernest Doku, telecoms expert at uSwitch.com.

"We would need to see more detail on its price freeze pledge, as there remains a question on what will happen to monthly contract prices where networks can potentially hide behind the absorbed handset cost."