Is the o2-Three Merge a Good Plan?

The planned merger of mobile networks Three and o2 has been accused of potentially causing long term damage for UK consumers. Owner of Three, CK Hutchinson is awaiting the approval of the European commission who will have the final say, and will know by the 19th May whether the takeover will go ahead. The £10.5 bn network is currently owned by Asia’s richest person Li-Kashing. However, the takeover, proposed a year ago, has not proven to be a smooth process, and is not over yet.

The Competition and Markets Authority (CAM) has expressed serious concerns about the wellbeing of consumers and are going as far as to say that the planned merger should be blocked or severely restricted by EU regulators. The main concerns that have sparked from the merge include leaving the Uk with just two other major UK operators, EE and Vodafone, which logically as a result, will cut competition, encouraging the three remaining (and now, all powerful) mobile networks free reign to jack up prices and even curb investments. Despite not having the final decision, Ofcom’s chief executive Sharon White has expressed her concerns by describing the new network to be as a ‘threat to consumers and network upgrades.’  shutterstock_403839859

The has also been objection from political party ‘Brexit’, who are currently campaigning for Europe to leave the EU. The party have questioned why the final decision is being made by the European Commission in Brussels rather than Ofcom or the UK Competition Watchdog and there are fears that the issue is becoming increasingly political.

CK Hutchison claims he knew there would be an objection from Ofcom, and hits back at their claims by outlining the benefits the merge could have. He claims that Sky, Tesco, Virgin and UK broadband have agreed to use the new network’s share of the airwaves to offer their own mobile packages. A result of such teamwork would add £5 bn in UK mobile infrastructure. Hutchison even addresses financial queries that expressed concerns of increasing prices for existing network users, due to lack of competition. He says that by joining the airwaves, Sky, Virgin and UK broadband can create their own mobile packages with plenty of counter offers and alternate prices.

There have been significant other changes to the UK telecoms market in recent times, including the takeover £25 bn takeover of EE by BT, that saw BT re-enter the market. This move was approved directly by Ofcom and CMA which leaves people to question whether they should have the authority to disapprove this new merger, as it will create an imbalance. Although there was no likely reduction is consumer choice, the agreement was passed with virtually no objection. Tom Mockridge, the Virgin media executive argues that the joining of Three and o2 is necessary to now provide a counter balance to the strength of BT/EE. If the merge is approved, the new network would be the UK’s new biggest service provider.

So, the question remains, is the proposal likely to pass?

According to reports, there have been last ditch attempts from Three with £3bn worth of new deals  with competitors, in a bid to get them on board with the change.

The final decision will be made next month by commissioner Margarethe Vestager who has said that she sees the approval odds at 50/50. She is adamant that a fourth mobile network would need to be created in order for the deal to work. With so many imposing opinions inside the EU, would it be a totally wrong move?