O2-Three tie-up risks ‘long-term damage’

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The planned merger of mobile networks O2 and Three should be blocked or severely restricted by EU regulators, the UK competition watchdog has said.

The Competition and Markets Authority (CMA) expressed “serious concerns” to the European Commission about the deal.

It warned the merger could cause “long-term damage” for UK consumers as it would leave only three mobile networks.

The European Commission has until 19 May to make a decision on the proposed £10.5bn tie-up.


The planned purchase of O2 by Three, which is owned by Asia’s richest person Li Ka-shing, was announced early last year.

However, the deal would leave just two other major operators: EE and Vodafone.

Three is locked in talks with the European Commission and last week sent its suggested remedies to smooth the takeover.

The CMA said the remedies “fall well short” and insisted the commission should instead force most of O2 or Three’s mobile network to be sold off after the deal.

“Absent such structural remedies, the only option available to the Commission is prohibition,” Alex Chisholm, chief executive of the CMA, said in the letter to the European Commission.

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European competition commissioner Margrethe Vestager will make the final decision on the deal, rather than UK regulators.

“At best we see UK deal approval odds at 50/50. The risk, here, is the decision could become increasingly political (from a UK perspective it already is) as it’s so close to the Brexit vote,” said Mandeep Singh, a partner at Redburn analysts.

Campaigners for a British exit from the EU – known as “Brexit” – have already raised concerns about the European Commission having the final say instead of the CMA or Ofcom.

The Commission has previously approved deals in Ireland, Austria and Germany that reduced the number of mobile networks from four to three.

O2 and Three also point out that Sky and Tesco Mobile have expressed an interest in using their networks to provide further competition.

The UK telecoms market is going through significant change, with broadband, mobile and subscription TV providers increasingly competing with each other.

BT’s £12.5bn takeover of EE was approved by the CMA in January.

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