According to a recent press release, on Wednesday 11th May 2016 the European Commission blocked the proposed acquisition of O2 by CK Hutchison (Three owner). The Commission highlighted the following reasons for prohibiting the acquisition:

  1. Due to the reduction from 4 networks to 3, there would be less competition leading to higher prices and reduced choice for consumers. A combined Three/O2 would have had a market share of over 40% (if O2’s Share of Tesco Mobile is included) resulting in less incentive to compete with Vodafone and EE.
  2. The future development of the entire UK mobile network infrastructure could be hampered. This is because Vodafone/O2 and EE/Three currently have network sharing arrangements in place. If O2 and Three merged they would have visibility of both network plans which could hamper future network developments.
  3. A reduced number of mobile network operators effectively willing to host virtual operators (MVNO’s such as Tesco Mobile who use O2’s network), resulting in MVNO’s being in a weaker position to obtain favourable wholesale access terms.

So where does this leave the UK mobile market?

Hutchison have stated they will review the Commission’s decision and consider their options including a legal challenge. While Telefonica as still looking to offload O2 UK either to a another buyer or floating the company, with Liberty Global (Virgin Media owner) reported in the press as being a potential alternative buyer.

If Liberty Global were to takeover O2, this would mean Virgin Media would be able to offer quad-play services, Fixed Line, Broadband, TV & Mobile (Virgin Media currently uses the EE network for its MVNO service), and would be capable of increasing the challenge to BT following their purchase of EE.

Despite this set-back for CK Hutchinson the potential for further consolidation in the UK communications market is still strong.

ERA have experienced consultants that deal with suppliers on a daily basis resulting in exceptional industry insight, ensuring that our clients achieve market leading commercials and solutions in this fast moving market place. Please contact us for more information.