Industry fears laid bare in merger hearings

Industry fears laid bare in merger hearings

 Industry concerns about the potential impact of the BT/EE merger have been revealed in documents released by the Competition and Markets Authority (CMA). Summaries of conversations with Telefonica, Hutchison Whampoa, TalkTalk and City Fibre were released. The discussions took place as part of the regulator’s evidence-gathering process.

TalkTalk’s meeting with the CMA undoubtedly produced the most controversial talking points. The MVNO expressed concerns over the ‘real risk’ of coordination in the market between wholesale providers should the deal go through, suggesting that a combined entity would have a ‘huge incentive’ to stifle innovation.

‘TalkTalk said that it considered there to be a real risk of potential coordination in the market for wholesale mobile as a result of a reduction in the number of players,’ the CMA said in point 79 of its TalkTalk summary. ‘TalkTalk had seen no evidence to suggest this was happening at present, but considered that the merger would make this more likely.’ The MVNO also expressed concerns relating to the wholesale of services, with the firm stating that the combined entities’ presence in four markets could lead to them creating wholesale barriers to competition.

The summary read: ‘TalkTalk said that BT would have a huge incentive to frustrate innovation by other market participants and to frustrate others’ access to quad-play eg. by foreclosing MVNOs active in fixed-line from access to wholesale mobile services.’ The MVNO also complained that in general the wholesale market was not in a good state, saying: ‘TalkTalk said that the wholesale market did not work very well at present, but the merger would make matters even worse because the combined entity would have no incentive to offer competitive terms to competing providers of fixed communications services.’

Both BT and EE fiercely contest the notion that a combined entity would adversely affect competition. EE has consistently pointed to the fact that it currently supports more than 30 MVNOs on its network, while BT has stated repeatedly that its wholesale broadband service has worked well. A BT spokesperson told Mobile: ‘BT and EE have track records of being willing and enthusiastic wholesalers, and we intend that to remain the case.’ Other summaries released by the CMA show that both Telefonica and Hutchison view the potential
deal as being positive for market competition.

However, the two companies also expressed concerns about the possibility of a merged BT/EE achieving a position of market dominance.

Recently, Dixons Carphone submitted a complaint to the CMA because it believed the regulator was not ‘taking proper account’ of the role of the indirect channel in its assessment of the deal.

The regulatory process has been complicated by the fact that Three owner Hutchison Whampoa’s deal to buy O2 from Telefonica is being assessed at a European level. Ofcom’s role in the process has also added to the complexity of the merger decision. The regulator announced that it will be carrying out a review of the whole sector, in which all of the decisions will no doubt be analysed once again. 



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